Government plans Rs4.965 trillion bank borrowing in April-June

KARACHI: The government is set to borrow Rs4.965 trillion from banks between April and June 2024, primarily through the sale of treasury bills and bonds, to plug its budget deficit.

From April through June, 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 plans to raise Rs2.490 trillion through long-term paper auctions, according to the central bank's auction calendar, which was released on Friday.The government will borrow Rs2.475 trillion from commercial banks through the auctions of market treasury bills.

The government’s increasing spending requirements force it to borrow money from banks.Pakistan’s public debt increased by 6.51 percent to Rs64.805 trillion in the first eight months of the fiscal year 2023–24, according to the latest figures from the State Bank of Pakistan (SBP).

In February, there was a 19 percent year-on-year growth in the federal government debt.Between July and February of FY2024, the central government's domestic debt increased by 10 percent to Rs42.671 trillion. The debt increased by 24.9 percent year-on-year in February.

The public debt has increased as a result of the government's expanding financial requirements and limited external financing. The government's increasing reliance on domestic resources to fund its budget deficit, in the face of rising interest rates, is reflected in the rise in markup payments, particularly on domestic debt.

Due to high interest rates, declining revenues for state-owned enterprises, and inadequate tax collection, the government is finding it increasingly difficult to pay off the nation's debt.Currently, the SBP’s benchmark interest rate is at 22 percent.

Analysts expect the SBP to start monetary easing in the second quarter of this year. Although the recent surge in fuel prices has caused fears, inflation is expected to decline in the coming months due to a significant high base effect.As a result, there is growing anticipation that rates may be lowered during the upcoming monetary policy review on April 29.