Loss-making govt firms borrowed Rs142.3bn this fiscal year.

KARACHI -- Rising cost of money has failed to stop the flow of credit to loss-making public sector enterprises (PSEs), as they have borrowed a record Rs142.3 billion this fiscal year so far.

The 20 per cent policy interest rate has made it impossible for investors to enter new ventures and increased the government's domestic debt servicing.

However, loss-making state firms, already causing the economy to bleed, have received record money from banks. The latest data released by the State Bank of Pakistan showed that the credit to state-owned firms reached Rs142.3bn during the first eight months (July to February) of the current fiscal year.

This is surprising since the credit to public sector enterprises during the same period a year ago was just Rs2.5bn. The government announced austerity measures earlier this year to cut its spending, but no plan has been devised so far to get rid of the losses or the loss-making PSEs.

The amount of credit to the public enterprises during the current fiscal year is astonishing since there was no credit in the previous fiscal year. Instead, a net withdrawal of Rs43.3bn was noted. In the 2020-21 fiscal year, the net withdrawal was Rs53.77bn.

The government is making efforts to generate more revenues and it increased taxes on petroleum products, food products and many other products, while the general sales tax also increased to 18pc.

The highest revenue is being generated through GST since the 30pc inflation has increased the prices of each item being sold in the markets. High costs of products yield higher revenue for the government.

However, the...