New Delhi : Yes, it is not uncommon for governments to take new loans in order to repay existing loans. This situation can arise when a government faces a budget deficit and requires additional funds to cover its expenses, including debt repayment. By taking a new loan, the government can use the borrowed funds to meet its financial obligations, including repaying the previous loans.
In the case of the Madhya Pradesh government, it has been reported that they have been taking loans regularly, with a significant amount borrowed in recent months. The state’s treasury appears to be in a poor condition, and the increasing debt has raised concerns within the finance ministry.
It is mentioned that the government has been making populist announcements and undertaking development projects worth a substantial amount, which has further strained the treasury. The finance ministry and its officers have been trying to manage the situation by reallocating funds from one department to another. However, the finance ministry itself seems to be struggling to address the issue.
In the supplementary budget, the Ministry of Finance had to allocate an additional amount of 761.90 crores to repay the interest on the loan. The original budget had provisioned 2269.90 crores for this purpose. The interest amount on the loan has reached 3000 crores, leading to an imbalance between income and expenditure, which is becoming a growing concern.
It is important for governments to carefully manage their finances and ensure a sustainable debt repayment plan to avoid such situations where they have to rely on new loans to repay existing ones.