Will Jagan drive AP into financial bankruptcy with his mindless borrowing?

The financial debauchery and large borrowing of the AP government is now the hottest topic of discussion among financial experts in the state and in New Delhi. The indiscriminate borrowing of the AP government is now seen as a perfect recipe for financial disaster.

Worse yet, the Jagan government rigs the numbers and shows borrowing under various headings to evade the provisions of the FRBM law.

The 2003 Fiscal Responsibility and Fiscal Management Act (FRBM) sets a target for governments to establish fiscal discipline in the economy, improve the management of public funds and reduce the budget deficit. However, the AP government borrows far too much beyond its authorized levels. For example, on the loans of Rs 19,100 crore from YS Jagan Mohan Reddy government, Rs 4,100 crore was secured by pledging government assets. He must also pay Rs 3,470 crore for the pending amount of overdrafts taken.

Due to financial mismanagement, the authorized AP government borrowing limit has been reduced from Rs 42,000 crore to Rs 20,000 crore. From this, the state government has already taken Rs 18,100 crore. So paying the salaries too is now a Herculean task for this government. According to conservative estimates, the AP government borrows at the rate of Rs 6000 crore per month.

Determined to bypass the system, the AP government has created several companies and borrows heavily on their behalf. For these loans, the government pledges its assets as a counter-guarantee. These loans are called off-budget loans. These figures are not included in the overall budget. Thus, by a clever falsification of the figures, the State indulges in a borrowing frenzy. These companies have few staff but huge budgets and the loans taken are diverted to the state government. Experts say the AP government is likely to go bankrupt if the same trend of financial mismanagement continues.

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