All Pakistan Business Forum (APBF) has asked the government to work on a sustainable way to build reserves and focus on economic growth and come up with export-boosting policies instead of borrowing funds from the State Bank of Pakistan during next fiscal year, as the total borrowing in the ongoing fiscal year has doubled to Rs2.7 trillion.

APBF President Syed Maaz Mahmood observed that disappointing revenue collection during the ongoing fiscal year forced the government to borrow heavily from the SBP but the decision not to borrow from next fiscal year does not tally with the actual revenue position of the government.

He said that the possible huge outflow of funds from the banks to the government would practically dry up the liquidity for private sector ultimately affecting the overall economic activity. The government’s total domestic debt as of April has reached Rs18.5 trillion. He believes that the government would opt to issue long-term PIBs to raise liquidity with highly attractive rate of around 13 percent or more.

Maaz Mahmood stated that the government in the budget 2019-20 plans to increase revenues by up to Rs1.4tr on account of higher inflation and reducing subsidies. At the same time, the government’s debt retirement to scheduled banks has more than tripled to Rs859 billion compared to Rs247bn in the same period last year.

Joining the ranks of others in criticizing the government, All Pakistan Business Forum President said the high mark-up rate would further plunge the country in expensive debt. He said that the government has been exploring possibilities of financing its deficit from multiple sources including IMF, World Bank, domestic borrowing. He said that the extremely low level of foreign direct investment implies that foreign investors are not satisfied with the economic policies of the current government. The APBF president said the government entered into a long-term commitment for short-term relief, which is short-sighted. He said that international loans are more expensive than domestic ones but government was piling up international loans, tilting its loan portfolio towards expensive sources of funds and its implications will be felt in the future.

The current account continues to run in deficit despite the record plunge in oil prices which was the single biggest import of Pakistan. Exports too, continue to decline and the drop in exports has reached alarming proportions.

He believes that in the absence of central bank, the government will now look towards the commercial banks for its financing needs.

The PML-N government had also issued PIBs at higher rates in the beginning of their five-year tenure but the move proved to be costly after interest rate fell to single digit.

Bankers have also warned that the government’s recent drive to get Rs40,000 prize bonds registered could also deprive it from possible source of borrowing.