In severe financial trouble, Kerala borrows ₹3,500cr to pay salaries

The communist-ruled state faces its worst financial crisis, exacerbated by the COVID pandemic

For Kerala, it is a no-win situation: should it save lives or protect livelihoods.

If tackling the surge in COVID cases was not enough, the Pinarayi Vijayan government in Kerala was forced to borrow Rs 3,500 crore on Wednesday September 1 to pay salaries and pensions, reports

Kerala is facing one of its worst financial crises as public debt has reached over 36% of the state’s GDP. But the disaster has been going on for some time. Between 2015 and 2019, Kerala’s income fell by 61% to 55%. The ensuing COVID pandemic has only worsened the state’s financial health.

This time, the Kerala government borrowed the sum on the open market, facilitated by the Reserve Bank of India (RBI), at an incredibly high rate of 7.06%. The state used Rs 2000 crore at an interest rate of 7.04% with a repayment period of 13 years and Rs 1500 crore at an interest rate of 7.06% for 18 years. So far this year, Kerala has borrowed Rs 15,000 crore.

In June last year, the state took out a loan of Rs 1,000 crore at an interest rate of 6.55% for 10 years and Rs 500 crore at 5.44% for four years, again by through the RBI bond auction.


Kerala is struggling to contain the COVID pandemic even as the rest of the country moves towards herd immunity. India recorded 43,034 cases on Tuesday August 31, while Kerala contributed 30,198 cases to the national tally. The state’s inability to control the spiraling cases and resulting lockdowns have negatively impacted its economy.

Read also : Report: Regardless of vaccination, you can be a silent carrier of COVID

For Kerala, it is a no-win situation: should it save lives or protect livelihoods. In some districts, the average test positivity rate (TPR) is over 15%. The suicide rate has also increased, with small traders and farmers responsible for most of the deaths. Over the past two months, Kerala has reported more than 30 pandemic-induced suicides.

Kerala Finance Minister KN Balagopal said a few days ago that the state needs a “ready-made” idea to overcome the current crisis.

Read also : Launch smart strategic lockdown strategy, says Ministry of Health in Kerala

However, the state is in no mood to cut spending. “Now is not the right time to think about budgetary corrections, and there is no question for us of cutting expenses. Rather, now is the time to think outside the box, because as a democratic government we need to ensure that livelihoods are protected, which requires that we continue to spend so that economic activity is not further blocked and does not contract. an already ravaged economy,” Balagopal told PTI in an interview a few days ago.

Sarah J. Greer