Kerala Nears Loan Limit, Faces Deeper Financial Crisis Amidst Economic Strain

Kerala, grappling with a severe financial crisis, has nearly depleted its entire loan quota allocated for the current fiscal year. The state has utilized almost all of the permitted borrowing amount, leaving only a meager Rs 52 crores out of the total Rs 21,852 crores. With the state’s financial health in jeopardy, there is growing concern about its ability to sustain essential services and development projects. The situation has arisen due to a combination of factors, including the inclusion of loans for Kerala Infrastructure Investment Fund Board (KIIFB) and welfare pensions under general loans, leading to borrowing limitations.

The Kerala government had sought permission to increase the borrowing limit to four percent of the state’s total domestic production, allowing access to an additional Rs 4,500 crores. However, the central government has not yet approved this request. If Kerala fails to secure more funds or if the central government does not revise the borrowing limit, the state may face intensified financial challenges, impacting its ability to meet essential expenses and hindering economic recovery efforts.