Govt to raise Rs4.25 trillion through MTBs, PIBs in April-June

KARACHI: The government will borrow Rs4.25 trillion in April-June period of 2018 through auctions of treasury bills and long-term papers to cover budgetary gaps, central bank auction calendar showed on Tuesday.

The State Bank of Pakistan (SBP) will auction Rs4.050 trillion worth of three, six, and 12 months treasury bills, while Rs200 billion will be raised though three-, five-, 10 and 20-year Pakistan Investment Bonds during the second quarter of current calendar year.

The auction calendar does signal the government’s increasing spending spree ahead of general elections due in July this year.

Analysts said the government may not be able to raise the targeted amount after the central bank kept key policy rate on hold at 6.0 percent in March meeting.

“Pakistan does have a huge maturity of PIBs and T-bills before June and it would be interesting to see how the ministry of finance approaches new auctions to generate liquidity,” brokerage Tresmark said in a report.

T-bills worth Rs4.042 trillion are expected to be matured in the current quarter.

The last auctions showed that banks’ investment in the long-term government paper remained dull in anticipation of interest rate hike. However, banks participation in a three-month T-bill was high.

Many analysts see a cumulative 100- 150 basis points increase in policy rates in 2018 due to weakened rupee, rising credit demand, widening current account gap and expectation of higher inflation in the coming months, especially in Ramazan.

“We believe external vulnerabilities will continue in the days ahead, and monetary tightening will resume in upcoming meetings,” said an analyst at Alfalah Securities.

The government is securing funding from domestic mostly banks and external sources to meet its high spending requirement.

The budget deficit rose to 2.2 percent of gross domestic product in the first half of current fiscal year from 1.2 percent in July-September FY18, according to ministry of finance.