Is Andhra Pradesh walking into a debt trap with the indiscriminate spending in the name of welfare schemes? Are the faulty fiscal management practices of AP government taking the state towards ruination? These are the questions that arise naturally if anyone listened to AP finance minister Buggana Rajendranath’s presser the other day.

He not only defended the indiscriminate borrowing but also said that the state would borrow further. The state has already crossed the limits imposed by the FRBM in borrowing. The Centre has allowed the state to secure loans to a tune of Rs 20750 crore from April till December 2021. However, the state has already taken Rs 20100 crore worth of loans from April till July 11, 2021. On Tuesday, the AP secured another loan of Rs 1750 crore by auctioning the government securities. This apart, the state government is also securing loans through the corporations by pledging government assets. The State Government has also informed the RBI that it would secure another Rs 5000 crore worth of loans by September this year. As a result, the total loans could go up to Rs 1 lakh crore.

The AP government has also ignored the letter of the Central Government, which clearly told the Centre that the borrowings of all kinds, including those taken in the name of off-budget borrowings, corporation, NaBARD and EAP loans, should be well within the FRBM limits. The letter also mandated that at least a half of the loans obtained should be used for capital investment. However, the State Government has blatantly ignored this letter.

Sources in the government say that as per the Treasury Code, all payments should be made by the Deputy Treasury officer or the PAO. But, in the case of AP, the payments are being made by the Special Secretary (Finance). This, experts say, is a clear violation of the treasury code.