KARACHI: The government sector borrowing for budgetary support declined sharply, ie, 69 percent or Rs 2.9 trillion during the nine months of this fiscal year (FY25).
According to Economic Survey of Pakistan, issued on Monday, during July-March FY 2025, the government sector borrowing for budgetary support decreased to Rs 1.320 trillion compared to Rs 4.220 trillion during the same period last year (FY24), showing a notable declined of Rs 2.9 trillion. During the period, the government retired Rs 287.4 billion to the State Bank of Pakistan (SBP) against a retirement of Rs 654.7 billion last year.
Similarly, the government borrowed Rs 1.608 trillion from scheduled banks, significantly less than Rs 4.874 trillion in the same period last year. Therefore, net government sector borrowing decreased from Rs 3.856 trillion in July-March FY 2024 to Rs 1.019 trillion in same period of FY25.
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During the period under review, low government borrowing reflects fiscal consolidation as fiscal deficit remained 2.4 percent of GDP during July March FY 2025 compared to 3.7 percent the same period last year.
On the other side, credit to private sector rose markedly to Rs 767.6 billion during July to March of FY25, a substantial increase from Rs 265.2 billion in the same period last year. Within the private sector credit, loans to businesses observed expansion of Rs 830.9 billion compared borrowing of Rs 307.8 billion during same period last year.
According to Economic Survey, this expansion was primarily driven by the manufacturing sector, which accounted for Rs 573.1 billion (increase of Rs 278.7 billion). Across sectors, credit to food sector declined, whereas the textile sector witnessed a sharp surge in borrowing, reaching Rs 255.1 billion compared to Rs 26.7 billion in the previous year.
Other sectors also exhibited strong credit growth: construction sector credit rose to Rs 19.9 billion (from Rs 4.2 billion), accommodation and food services jumped to Rs 40.4 billion (from Rs 2.6 billion), and the information and communication sector rebounded significantly with a credit inflow of Rs 103.5 billion from a net retirement of Rs 3.0 billion.
The disaggregated data shows that the increase in credit to private sector was largely concentrated in working capital loans, which rose to Rs 611.8 billion July-March FY 2025 from Rs 275.7 billion last year. Fixed investment loans also picked up significantly, owing to higher investment in petroleum, sugar and fertilizer.
Fixed investment loans surged to Rs 236.7 billion during the period under review, up from Rs 47.2 billion last year. The revival in credit appetite is largely attributed to a more accommodative monetary policy stance, which lowered borrowing costs. Additionally, the relaxation of import restrictions on raw materials and capital goods, coupled with an improved outlook for business activity, supported the expansion in investment and operational financing.
During July–March FY 2025, commodity financing recorded a net retirement of Rs 303.4 billion, slightly lower than Rs 362 billion observed in the same period last year. This was mainly contributed by Wheat financing, with a net retirement of Rs 326.9 billion, lower than Rs 427.7 billion recorded during the same period last year.
The continued contraction in wheat financing reflects a significant policy shift, as the federal government has stepped back from regulating wheat prices and the Pakistan Agricultural Storage & Services Corporation (Passco) has not participated in wheat procurement during this period. This policy realignment contributed to reduced financing needs within the wheat supply chain.
Copyright Business Recorder, 2025
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