KARACHI: The government planned to borrow 5.7 trillion rupees from banks over three months (November-January) to close the gap between revenue and expenditure, the central bank’s auction schedule said on Saturday.
Planned borrowing is above the October-December target of Rs 5,875 billion.
The government will borrow 5.4 trillion rupees at market treasury bill (MTB) auctions, while it also plans to attract 1000 billion rupees through the sale of Pakistani investment bonds (GDP) at interest rates. fixed and variable.
The State Bank of Pakistan (SBP) would sell Rs 300 billion fixed rate GDP and Rs 175 billion five-year GDP and Rs 175 billion 10-year variable rate GDP.
It would also auction Rs175 billion of a variable rate GDP over three years and Rs175 over two years.
The SBP is also reportedly selling Rs 225 billion of national Islamic five-year floating rate bonds to Pakistani government Ijara Sukuk and Rs 75 billion.
The government has met its commitment of zero new borrowing from the SBP, so it is continually dependent on bank borrowing to meet its financing needs as foreign financing has dried up due to the delay in the Fund’s lending program. international monetary policy.
The auction calendar showed that the main objectives were allocated to long-term instruments.
The latest targets also revealed that the dependence on borrowing from BIPs, which is long-term, is high.
In addition, the government wants to increase its funding by issuing Sharia-compliant documents.
Thus, it began to issue national sukuk regularly, just like conventional debt instruments. This will provide banks with a way to park their excess deposits.
Over the past fiscal year, the government kept its pledge to refrain from borrowing directly from the SBP, which has positive connotations for anchoring inflation expectations and self-discipline, according to the annual review of SBP performance for fiscal year 2021.
“The SBP, in coordination with the government, also introduced new variations of Pakistani Variable Rate Investment Bonds (PFLs) and revised the auction participation mechanism for PFLs to enable the government to meet its demands. market and increase the maturity profile of public debt, ”the report said.
The country’s public debt stood at Rs 39.770 billion at the end of August. Public debt continued to rise due to the financing of the budget deficit, the depreciation of the exchange rate, the increase in interest payments, the economic stimulus plan linked to the Covid and the social security programs.
The need for financing the budget deficit is mainly met by the domestic market and within national sources, a large part of the financing is mobilized by long-term government securities, especially when there is no borrowing from the SBP. .
Domestic debt rose 0.26 percent to Rs 26,334 billion at the end of August. It included government securities, held primarily by commercial banks, and non-bank debt, such as national savings plans, including priced bonds. A recent increase in the key rate will increase the cost of government debt.
Debt accumulated through long-term instruments fell slightly to 19,041 trillion rupees from 19,556 trillion rupees, while short-term debt fell from 6,680 trillion rupees to 7,238 trillion rupees , highlighting the government’s growing dependence on short-term loans.