Karnataka has exhausted borrowing capacity, Finance Dept note shows

Leader of the Opposition R. Ashok told the Legislative Assembly on Tuesday that Karnataka was "on the verge of bankruptcy," reading out a Finance Department note that said the state had exhausted its borrowing capacity to fund budgetary announcements for 2026-27.

The note, which Mr. Ashok displayed during a debate on drought, stated that taking up any new schemes would require cutting allocations from other departments, and that there was no fiscal space to borrow further for new projects.

Citing the note, he said the state government has a balance cost of works exceeding ₹2 lakh crore. Pending bills from the Public Works Department, Water Resources, Minor Irrigation and Rural Development and Panchayat Raj alone amount to ₹36,136 crore, he added, while transport corporations, irrigation corporations and electricity companies are already facing a cash crunch, including for salaries.

The note recorded a fiscal deficit of 2.95% against a permitted level of 3%, a revenue deficit of ₹22,957 crore, and cumulative liabilities at 24.94% of GSDP against a permitted 25%.

Mr. Ashok described the note, issued on September 17, as a "slap on the face of the government" and questioned whether new proposals announced by the Chief Minister during visits to Mangaluru and Kalaburagi would materialise. "Drought has gripped the State and farmers are migrating. But the government treasury is empty and there is a financial drought," he said.

He alleged that despite advance warnings from the India Meteorological Department and the Centre, the government had not taken precautionary measures, and that the drought declaration had been delayed by four months. He also pointed to discontent within the ruling Congress, noting that senior MLA H.K. Patil has threatened to resign if Gadag district is not included in the drought-hit list, and that another senior leader, Appaji Nadagouda, has said he will sit on a hunger strike.