Govt to borrow Rs6 trillion from banks in three months

KARACHI: The government plans to borrow Rs6 trillion from banks through treasury bills and conventional and Islamic bonds in the next three months to finance its fiscal deficit, the central bank data showed on Friday.

The government will raise Rs3.464 trillion in December to February period through short-term treasury bills that mature in three, six and 12 months, according to the auction calendar issued by the State Bank of Pakistan.

It will also borrow Rs2.360 trillion through long-term Pakistan Investment Bonds (PIBs) that have fixed and floating rates and tenors of three, five, 10, 15 and 20 years. In addition, the government will issue Rs60 billion worth of variable rental rate Ijarah sukuk and Rs50 billion worth of fixed rental rate sukuk, both with three- and five-year maturities, to tap the Islamic banking sector.

The borrowing plan for December 2023 to February 2024 is lower than the Rs8.501 trillion that the government had borrowed from banks in the previous three months. Analysts said the lower borrowing target reflected improved revenue collection and reduced spending needs by the government, which is also expecting to receive $700 million from the International Monetary Fund (IMF) in January as part of its $3 billion loan programme.

The Federal Board of Revenue said it collected Rs2.748 trillion in taxes in the first four months of the fiscal year 2023/24, slightly below its target of Rs2.782 trillion. Analysts said the government raised more money than it intended to at the recent PIB floater auctions. This suggests an accelerated government effort to shift the maturity of debt from short-term to medium-term instruments.

Teh growing spending, rising interest rates, and limited foreign funding are the main reasons why the government usually keeps taking out large bank loans. Banks made substantial investments in government securities because the government needed money, and they are currently seeing big returns on these investments.