Govt plans Rs3.92 trillion debt sale to fund deficit

KARACHI: The government plans to borrow Rs3.92 trillion from banks through treasury bills and bonds in the next three months to finance its fiscal deficit, the central bank said on Tuesday.

From March through May, the majority of the borrowing is expected to be done via fixed and floating rate Pakistan Investment Bonds (PIBs) that have maturities of three, five, 10, 15, 20, and 30 years.

The government will raise Rs2.110 trillion through long-term paper auctions, according to the central bank's auction calendar, which was released on Tuesday. The government plans to borrow Rs1.810 trillion from commercial banks through the auctions of market treasury bills.

PSX Auctions

The Pakistan Stock Exchange Limited (PSX) said on Tuesday it would conduct six auctions of government sukuk in the next three months, with a total target of Rs300 billion.

The sukuk will have tenors of one, three, and five years, and will be offered in fixed and floating rates, according to the PSX auction calendar.

The government will raise Rs60 billion through the sale of 1-year Islamic bonds during this quarter. Additionally, the government targets to raise Rs120 billion through the sale of 3-year and 5-year fixed-rate Islamic bonds. The Rs120 billion will be collected through the sale of GIS-floating rate bonds with tenors of 3 and 5 years.

The auction calendar released by the local bourse reveals that two auctions will be conducted in March, one on March 14, and the second one is scheduled on March 28, 2024. In the respective auction, the domestic equity market has a target to raise Rs100 billion in total.

According to the breakdown of the total amount, PSX plans to raise Rs20 billion through GIS (short term), Rs40 billion through GIS (fixed rate), and the remaining Rs40bn through the sale of GIS (floating rate).

Likewise, PSX will host two auctions in the month of April, one to be held on April 08 and the other one on April 25, with a cumulative target of Rs100 billion through different tenor Islamic bonds. Among this total, Rs20 billion will be obtained through short-term GIS, while Rs40 billion each will be raised through fixed and floating GIS.

Moving forward, May will also witness two auctions with a total target of Rs100 billion. The government plans to raise this amount by selling Rs20 billion worth of short-term GIS, and 40 billion each through fixed and floating GIS. The governmentsuccessfully launched a one-year Sukuk at the PSX, the first auction was held in November 2023, raising lower-cost debt from non-bank and retail investors.

The government needs to borrow money from banks at record-high interest rates due to its growing spending needs. Currently, the policy rate hovers at 22 percent.

However, according to the last caretaker government, it managed to improve the domestic debt profile by extending the maturity of the government securities, raising debt on a margin below the policy rate, and tapping non-bank and retail investors through the capital market. The focus was on reducing borrowings from government securities through the banking sector.