The federal government’s budgetary borrowing for the financial year 2021-22 was 85 percent more than the last year, while the private sector borrowing from banks soared by 142 percent.
According to the latest data from the State Bank of Pakistan, the government’s budgetary borrowing crossed Rs 1226 billion, or 85.4 percent, to Rs 2661 billion during the fiscal year FY22.
The huge increase in budgetary borrowing reveals the fiscal deficit. Finance Minister Miftah Ismail said at the start of June that the fiscal deficit for FY22 would be 8 to 9 percent of GDP. But, he said Pakistan would decrease its budget deficit to 5 percent in FY23.
However, the situation in fiscal FY22 was different, as private sector borrowing also touched new highs, while the economy expanded by 6 percent.
Read more: Govt borrowing from banks falls 66pc in seven months
The meetings with the IMF focused on the consolidation of the economy, which directly caused the withdrawal of subsidies being given on petroleum products and electricity by the former government.
Meanwhile, the Islamic banks increased their lending to the private sector by Rs100billion in the fiscal FY22, signifying the increasing confidence of the Islamic banks, while it also presented the increasing share of Islamic banking in the current banking industry.
The total lending by these Islamic branches in FY22 was a Rs 353.3billion, compared to Rs 184 billion in the corresponding period of last year.
However, some bankers claimed that the last quarter of fiscal FY22 witnessed a lower growth in lending to the private sector, because of higher interest rates.
The SBP also increased the interest rate to 13.75 percent, which is much high for the banks, which will have to extend loans at higher rates to cover the risks.
Moreover, the finance minister has already declared that inflation would be higher in FY23 than experts consider it could be in the range of 19 to 22percent. It shows that the interest rate, which is to be proclaimed on July 7, might be increased to come closer to inflation.
