Jul 1, 2024 to Jun 27, 2025: Borrowing for budgetary support dives 30pc: SBP

KARACHI: In a significant sign of improved fiscal management, the federal government’s borrowing for budgetary support dropped sharply by 30 percent in the last fiscal year (FY25), driven by enhanced fiscal discipline and tighter expenditure controls.

The State Bank of Pakistan (SBP) on Tuesday released the borrowing data for a period of July 1, 2024 to June 27, 2025, which revealed that the federal government borrowing for budgetary support (from SBP and scheduled banks) decreased to Rs 5.554 trillion during the FY25 compared to Rs 7.89 trillion during the same period last year (FY24), showing a notable decline of Rs 2.336 trillion.

The bulk of government borrowing came from scheduled banks, as the IMF has imposed some restrictions on borrowing from the SBP. During the same period, the federal government borrowed Rs 276.5 billion from the state bank, compared to a net retirement of Rs 608.3 billion in the previous year.

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On the other hand, government borrowing for budgetary support from scheduled banks recorded a substantial decline of 38 percent or Rs 3.22 trillion during the period July1, 2024 to June 27, 2025. With fresh loans from the scheduled banks, overall, the federal government borrowing decreased to Rs 5.277 trillion in FY25, significantly less than Rs 8.498 trillion in FY24.

Economists said that less-than-targeted revenue collection and slow foreign inflows have compelled the federal government to rely on the domestic banking system to finance the fiscal deficit. However, on a positive note, borrowing has sharply declined, mainly due to record Rs 3.4 trillion SBP’s profits, which was transferred to the government’s account. SBP’s profit also enabled the federal government to conduct the first-ever buyback auction of the government securities.

In a bold and unprecedented step toward fiscal responsibility, the Ministry of Finance has successfully made early retirement of Rs 1.5 trillion in public debt during FY25. The ministry recently retired Rs 500 billion in debt owed to the State Bank a full four years ahead of its scheduled maturity in 2029. Previously, the government successfully bought back Rs 1 trillion in market debt completed by December 2024. This substantial early repayment has also contributed to a notable improvement in Pakistan’s fiscal indicators, bringing the debt-to-GDP ratio down from 75 percent in FY23 to 69 percent in FY25.

Compared to the federal government, provincial governments overall repaid Rs 532 billion to SBP and scheduled banks between July 1, 2024 to June 27, 2025 as against Rs 387.5 billion were repaid during the same period last fiscal year.

According to official statistics, during the review period, collectively provinces repaid Rs 170 billion of budgetary borrowing to the SBP. Among individual provinces, Balochistan repaid Rs 8.2 billion to the SBP, Sindh Rs 145 billion, and Punjab Rs 28.5 billion during the last fiscal year. However, Khyber Pakhtunkhwa borrowed Rs 12 billion from the SBP to meet its financial needs.

Additionally, the Azad Jammu and Kashmir (AJK) government retired Rs 15 billion, while the Gilgit-Baltistan government repaid Rs 7 billion during the same period.

Copyright Business Recorder, 2025