Central Government Restricts Kerala’s Borrowing Limit, Deepening Financial Woes

The financial crisis in Kerala has deepened as the central government, through the Union Finance Ministry, restricted the state’s borrowing limit to Rs 1,838 crores for the final phase of the financial year. This directive comes as a significant setback, considering Kerala’s initial plans to borrow Rs 7,000 crores during this period. The central government determined the borrowing limit based on the average amount in Kerala’s public account over the last three financial years. This restriction poses challenges for the state government in disbursing funds for various projects and maintaining social security schemes, including welfare pensions. The financial strain may also impact the timely payment of salaries to government employees in Kerala.

The state’s public account, which includes government employees’ Provident Funds (PFs), had amounts of Rs 12,000 crores, Rs 19,000 crores, and Rs 9,600 crores in the financial years 2020-21, 2021-2022, and 2022-2023, respectively. The average of these amounts, Rs 14,000 crores, was deducted from the state’s loan limit, posing a significant challenge for Kerala as it faces unexpected constraints on its expected borrowing capabilities.