KARACHI: The federal government has successfully retired over one trillion rupees in domestic debt borrowed for budgetary support in the first quarter of fiscal year (FY25), supported by healthy foreign inflows and the SBP’s record profit.
Analysts said that this shift from borrowing to repayment has been facilitated by healthy foreign inflows including $1 billion IMF tranche and Rs 3.4 trillion profit reported by the State Bank of Pakistan (SBP). These two segments have bolstered the government’s financial position and helped to improve fiscal management.
Leveraging liquidity from the recent SBP profit transfer to the federal government, and foreign inflows, coupled with prudent fiscal policies, have enabled the government to reduce its debt burden, suggesting a gradual stabilization of the economy.
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Analysts view this trend positively, as it indicates a commitment to enhancing fiscal responsibility and managing public finances more effectively. Overall, this development marks a promising step toward strengthening the nation’s economic resilience, they added.
On Wednesday, the State Bank of Pakistan (SBP) reported that from July 1st to October 4th, 2024, the federal government retired domestic debt totalling Rs 1.2 trillion obtained for budgetary support, compared to Rs 1.5 trillion borrowed during the same period last fiscal year (FY24).
The trend of repaying debt to the SBP has continued from the previous fiscal year, but the amount retired this year significantly exceeds last year’s figures. During July 1st to October 4th, the federal government repaid Rs 1.1 trillion to the SBP, up from Rs 335 billion in the corresponding period of FY24, reflecting an additional retirement of Rs 765 billion.
Additionally, during the period under review, the federal government repaid Rs 92 billion to scheduled banks compared to borrowing of Rs 1.835 trillion last year. This shift underscores the government’s commitment to reducing its debt burden and improving fiscal health.
The SBP has posted a record Rs3.42 trillion profit in FY24, up by 200 percent from last year’s Rs1.142 trillion due to higher interest rates and exchange gain. The entire profit has been transferred to the federal government, which has helped the government to overcome the financial crisis.
As the federal government has sufficient funds, in a historical move, it also conducted buyback auction of the short-term government papers in the first week of October 20224 and buyback T-bills worth Rs 351 billion set to mature in Dec 2024.
Copyright Business Recorder, 2024
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