Punjab borrows staggering PKR 405 billion from SBP in 38 days

While the federal government is restrained under International Monetary Fund (IMF) conditions from borrowing directly from the State Bank of Pakistan (SBP) to curb inflation, Punjab has emerged as an unlikely outlier, having borrowed a staggering PKR 405 billion in just 38 days of the current fiscal year.

From July 1 to August 8, the country’s biggest province borrowed more money from the central bank for budgetary support than the combined borrowing of the remaining three provinces. It outstripped the figures of Sindh (PKR 15.78 billion), Khyber Pakhtunkhwa (PKR 21.6 billion), and Balochistan (PKR 13.6 billion), according to documents seen by Nukta.

Federal repayments vs provincial splurge

In contrast, the federal government, barred by IMF conditionality, managed to repay Rs55 billion to the State Bank, reducing its stock of outstanding borrowing to PKR 5.27 trillion as of June 30, 2025.

The contradiction highlights a loophole in Pakistan’s fiscal framework while Islamabad is under strict IMF scrutiny, provinces continue to exploit central bank financing unchecked.

Economist Shahid Mahmood, speaking to Nukta, said that the current expenditures of the Punjab government are ballooning not only because of new development projects but also due to the establishment of new departments, which are increasing administrative overheads.

He added that the situation is further complicated by the fact that the federal government continues to provide subsidised loans to the Punjab government, giving it more fiscal space to spend beyond its means.

On the other hand, a former finance secretary, speaking to Nukta on condition of anonymity, termed the situation highly unusual. “This is not normal as all provinces are currently sitting on cash and I don’t see any reason for Punjab to borrow this aggressively,” he said.

The Punjab government had to meet its debt obligations, and recently, they also cleared the wheat debt, he added.

Recently, the Prime Minister’s Office sought an explanation from the Ministry of Finance and the Punjab government for failing to deliver the promised provincial cash surplus, a key IMF benchmark.

Punjab argued it missed the target because the Finance Division delayed transfers of its tax share under the NFC Award and the Federal Board of Revenue fell short of its collection goals.

However, officials noted that all provinces received less than projected federal transfers, yet Sindh, KP, and Balochistan performed far better, with Balochistan even exceeding its IMF-agreed surplus target.

SOEs 'still bleeding'

Meanwhile, the state-owned enterprises continue to hemorrhage cash, forcing them to raise another PKR 65 billion from commercial banks to stay afloat.

Their total outstanding debt has now ballooned beyond PKR 2.16 trillion, underscoring the scale of Pakistan’s public-sector financial crisis.