Govt to borrow Rs625bn from banks in April

KARACHI: The government will borrow Rs625 billion from the banking system in April, an amount which is more than 100 percent higher than its March target, revealed an official document on Tuesday, as it is to bridge the gap between revenue and expenditures.
The government plans to raise this amount through market treasury bills (MTBs) and Pakistan investment bonds (PIBs) – which is 127 percent higher than Rs275 billion target set for March.
Analysts said the shortfall in revenue and the rising current expenditure is forcing the federal government to excessively borrow from local banking system.
“Government needs more money, but the risks involved in these two kinds of borrowings could make a negative impact on private sector credit off-take,” said an analyst.
The central bank, in a report, said heavy government borrowing from commercial banks had constrained their ability to lend to the private sector.
According to the auction calendars issued by the State Bank of Pakistan (SBP) for the sale of PIBs and MTBs in April, the government will raise Rs575 billion through the sale of 3-, 6- and 12-month MTBs, which is 155 percent higher than Rs225 targeted for March. SBP will conduct three auctions in April.
The SBP issues calendar for PIBs and MTBs every month instead of on quarterly basis earlier.
An official said this practice eased adjustment of PIBs and MTBs transactions every month.
The calendar showed that first auction will be held on 1 April with a target of Rs100 billion, second on 15 April envisaging Rs200 billion and the third auction will be held on 29 April with a target of Rs275 billion.
In April 2015, the government has to retire Rs601.715 billion worth of MTBs as against Rs254.806 billion maturing in March.
Moreover, the government will mop up Rs50 billion through long-term investment bonds and for which only one auction will be held on 22 April.
The targeted amount does not include any fund for maturing payments. The entire loan will be used for running the state affairs.
The SBP statistics revealed that the stock of payables against PIBs climbed to Rs3.809 trillion as of December 31, 2014, while outstanding treasury bills amounted to Rs4.418 trillion.