A big chunk of the new debt will be utilized to repay the old debts and their interest cost.
The government has planned to borrow Rs6.78 trillion from commercial banks over the period of next two months, August and September 2022. The amount will be used to repay previous loans and to finance infrastructure development projects like roads and dams and the defense budget.
According to the central bank, out of the new debt, it will utilize Rs6.38 trillion to repay the maturing old debt of financial institutions.
The already heavy debt (both domestic and foreign), totaling almost Rs60 trillion by June 30, 2022, will be increased by the coalition government by a net Rs391 billion in the two months.
Compared to the budgeted expenditures, the collection of tax and non-tax revenue has remained low which is increasing Pakistan’s reliance on debt.
The government borrows from commercial banks by selling them conventional and Shariah-compliant debt securities like short-tenure T-bills and long-tenure Pakistan Investment Bonds (PIBs).
According to experts, the government may reduce its reliance on piling debt by going after rich individuals and land loads to pay their due revenue in taxes to the national exchequer.
