State Bank to raise Rs775bln through MTBs, PIBs auctions in May-July

KARACHI: The central bank on Tuesday said it would auction treasury and long-term papers worth Rs775 billion in May-July period to finance the government’s budget deficit.
According to the latest auction calendar released by the State Bank of Pakistan (SBP), the government plans to borrow Rs625 billion through the sale of three-, six-, and 12-month market treasury bills.
The government is also set to raise Rs150 billion through the sale of three-, five-, 10-, and 20-year Pakistan Investment Bonds, it said.
Analysts said the target fixed in the fresh auction calendar indicates that the government’s reliance on bank borrowing remains high.
However, borrowing from the central bank contained on account of strong foreign exchange inflows.
The government borrowed Rs1.290 trillion for the budgetary support from the banks during July 1 to April 24, 2015 as against Rs302 billion during the same period of the last fiscal year, the provisional data on monetary aggregates showed.
Cut-off yields on treasury bills continued to decline in the auctions held during the last two months.
The analysts said softening inflation rate and declining yields on treasury bills — both have set stage for further discount rate cut by the SBP in the monetary policy meeting later this month.
Inflation rate reduced to 2.11 percent in April 2015 from 2.49 percent in March due to lower oil and food prices.
As inflation is expected to stay low and the secondary market interest rates could fall, the State Bank is likely to slash the discount rate by 50 basis points, the analysts added.