Govt to raise Rs1,100bln  through T-bills, PIBs

KARACHI: The government will raise Rs1,100 billion through auctions of market treasury bills and Pakistan investment bonds in the May-July period for the repayment of maturities and budgetary financing, the central bank said on Tuesday.

The State Bank of Pakistan's (SBP) auction calendar showed that the bank will auction treasury bills to raise Rs900 billion during the three months; out of which Rs592.54 billion will be required for repayment against the matured amount. Another additional amount of Rs307.46 billion has been targeted for the budgetary financing.

Total Rs200 billion has been targeted in auctions of bonds during the three months. Maturing amount for the bonds is around Rs1,392.8 billion. Total Rs1,353 billion is maturing in July.

Analysts said the government is relying less on the borrowing on instruments as it has other avenues to meet the requirements.

The SBP’s broad money data showed that the government’s borrowing from commercial banks witnessed a decline of 16 percent to Rs1,072 billion during July 1 to April 24 from Rs1,280 billion in the same period a year earlier.

The government wants to curtail budget deficit to five percent in the current fiscal year. In the first half, fiscal deficit stood at 1.7 percent of the GDP as compared to 2.2 percent in the same period a year ago, the finance ministry said.

“Given the market liquidity situation and 50 basis point cut in the policy rate announced on September 11, 2015, the secondary market yield curve displayed downward shift in case of all tenor of less than three year maturities,” said the SBP in its second quarterly review on economy.

In mid-March, the long end of the yield curve also declined, indicating a successful transmission from short-term rates. “The transmission mechanism also affected the lending rates offered by commercial banks,” the SBP said.

The fall in lending rates resulted in reduction of cost of borrowing for the government. The central bank said in line with the declining policy rate trend, the weighted average lending rate continued to slide, reaching its lowest level in over a decade by end of the first half of the current fiscal year.

“Due to this lower cost of borrowing and relatively stable liquidity conditions, credit to private business increase,” the SBP said.

The private sector credit off-take registered growth of 45 percent to Rs296 billion during the first 10 months of the current fiscal year as compared to Rs296 billion in the corresponding months of the last fiscal year.