Islamabad, Aug 21: The audacious proposal to borrow Rs. 32 trillion for the fiscal year 2024–25 by the federal government is intended to cover the Rs. 8.5 trillion budget deficits as well as the Rs. 23.4 trillion in maturing debt that the authorities anticipate will be rolled over.
According to sources in the Finance Ministry, the government will borrow 92% of the Rs. 8.5 trillion locally. They stated that short-term instruments with maturities of three, six, and twelve months—such as Market Treasury Bills, Ijara Sukuk, and Pakistan Investment Bonds—will not be utilized to raise this sum.
This plan is largely dependent on the International Monetary Fund (IMF) approving the new bailout package on schedule and China continuing to provide financial support, which is anticipated to roll over approximately $7.9 billion in debt.
The State Bank of Pakistan needs Rs. 2.6 trillion to pay off loans to the IMF, China, and the United Arab Emirates, however this amount is not included in the Ministry of Finance’s plan. Currently, gross finance needs represent 26% of GDP, indicating an increasing reliance on debt rollovers, with $3.9 billion in foreign loans and $4 billion in cash deposits coming due this year.
This fiscal year, the government has chosen not to borrow from the central bank, but it will not back down from taking out foreign loans. According to sources, it intends to borrow $100 million from the Asian Development Bank’s Women Inclusive Finance Program and $400 million from the ADB under the Climate and Disaster Resilience Program. The Domestic Resource Mobilization Program will secure a $30 million loan.
Along with the $1.2 billion in new commercial debt that is planned, the plan also calls for the issuance of $1 billion in Panda Bonds and Green Bonds. This borrowing plan may not be successful, particularly since the IMF has not yet given the South Asian economy its most recent bailout payment.
