Bank loans to govt surged 182 per cent

F.P. Report

ISLAMABAD: During the first nine months of the current financial year, loans given by commercial banks to the federal government increased by 182 percent, while loans to the private sector decreased by 83 percent, according to a report on Tuesday.

Data from the State Bank of Pakistan (SBP) shows that these banks are willing to invest in government projects instead of lending to the private sector.

This reflects the growing need for liquidity for the government due to the decline in tax collections, but it also highlighted the growing risks of lending to the private sector due to unusually high interest rates.

According to the SBP, from July to April 7, the federal government was given a loan of Rs20.94 trillion, which was Rs1,043 billion during the same period last year, showing an increase of 182 percent.

The reduction in tax revenues was due to lower duty collection as imports were drastically reduced to save foreign exchange reserves in view of repayment of loans.
Inflation crossed the 35 percent mark in March and reached the highest level in history, but despite this, revenue collection through sales tax could not be promoted.

The shortfall in the first nine months of revenue reached Rs278 billion as the total collection was Rs5.155 trillion against the target of Rs5.433 trillion.

Another major reason for the reduction in taxes could be a major reduction in private sector credit that pushed growth to an all-time low.

During the first nine months, private sector credit declined by 83.6 percent or Rs993 billion to Rs194 billion from Rs1187 billion in the same period last year. (PPI)