Govt raises Rs1.09trln through MTBs auction

KARACHI: The government on Wednesday raised Rs1.09 trillion through the auction of the Market Treasury Bills (MTBs) against the target of Rs1.10 trillion to finance fiscal deficit.

The cutoff yield on the three-month paper slightly fell two basis points to 7.3259 percent.

However, the yields on the six-month paper and the 12-month paper remained unchanged at 7.5894 percent and 7.6700 percent, respectively.

The State Bank of Pakistan (SBP) said it sold Rs389 billion worth of three-month paper and Rs708 billion of the six-month and Rs0.03 billion worth of 12-month paper.

Analysts said the latest auction shows the market expects status quo in the upcoming monetary policy review due next month.

However, some research reports of brokerage houses see interest rates rising towards the last quarter of 2020. With the global commodities going up, especially oil, it seems difficult for the central bank to keep the interest rates flat in the long-run.

The Monetary Policy Committee (MPC) kept the policy rate unchanged at 7 percent last month.

The consumer price index (CPI)-based inflation fell to 10.9 percent in May from 11.1 percent in the previous month.

The government depends on banks for meeting its financing requirements due to zero borrowing from the State Bank of Pakistan.

The government has estimated borrowing of Rs2.417 trillion from banks in the next fiscal year to finance the fiscal deficit.

It will meet its spending requirements through issuing government securities such as T-bills, Pakistan Investment Bonds and Sukuk.

The government has set a fiscal deficit target of Rs3.9 trillion for FY22 so it is likely to remain dependent on the bank borrowing to bridge the deficit.