Govt plans Rs4.92trln domestic borrowing in three months

KARACHI: The government plans to raise Rs4.920 trillion from the sale of treasury bills and bonds up to the end of April 2021 to help plug the budget gap.

The State Bank of Pakistan (SBP) on Monday said it would hold fortnightly auctions for three, six and 12 months Market Treasury Bills between February and April. Total target for the six auctions is Rs4.300 trillion.

The central bank would sell Rs350 billion worth of three-, five- 10-, 15-, 20-, and 30-year fixed rate Pakistan Investment Bonds and Rs180 billion worth of three, five and 10 years floating rate PIBs. It would also auction Rs90 billion worth of a two-year floating rate PIBs in the period under review.

The government has issued an auction calendar for the government of Pakistan Ijara Sukuk, but it hasn’t set a target for the three fixed rental rate and variable rental rate Ijara Sukuk. The finance ministry is working on new assets against which they will issue potential Sukuk. So the government has kept the Sukuk auctions open, analysts said.

The pre-auction target for the T-bills was set at Rs4.30 trillion against the maturities of Rs3.949 trillion, the target was slightly higher than the maturing amount, they added. This shows that government dependence on borrowing from T-bills, which were short-term, was higher.

Prospects of domestic borrowing would be dependent on tax revenues. If the government manages to meet the revenue target for the coming months, its dependence on bank borrowing would come down, analysts said.

The Federal Board of Revenue (FBR) surpassed its monthly target for January 2021 as its collection fetched Rs363 billion against the desired monthly target of Rs341 billion.

For the first seven months (July-January) period of the current fiscal year, the FBR had collected Rs2.568 trillion against the desired target of Rs2.551 trillion, surpassing the revenue collection by Rs17 billion.

Pakistan’s fiscal deficit clocked in at 2.5 percent of gross domestic product (or Rs1.138 trillion) in the first six months of this fiscal year, compared with 2.3 percent of GDP (or Rs995 billion) in the same period of last year. It translated into an increase of 14 percent year-on-year (in absolute terms) during July-December FY2021.

While the overall deficit is higher compared with last year’s, the government has managed to keep primary balance at 0.7 percent of GDP (or Rs337 billion), which is in line with the pre Covid-19 IMF target.