Government to raise Rs4.375t from auction of t-bills, long-term papers

SBP could offer Rs150b worth of three, five, ten and twenty-year debt via Pakistan Investment Bonds (PIBs).

KARACHI: State Bank of Pakistan (SBP) on Friday disclosed the government intends to raise Rs4.375 trillion from banks through sale of treasury and long-term papers from November 2017 to January 2018.

According to The News, this amount is being borrowed to bridge the budget deficit and SBP would sell Rs4.225 worth of three, six and twelve-month market treasury bills for a 3-month period from November 8th, 2017 to January 17th, 2018.

SBP added it could offer Rs150b worth of three, five, ten and twenty-year debt via Pakistan Investment Bonds (PIBs). Rs4.330t will be paid-back by government to the banks during the period under review.

Government is intent on plugging the bulging budget deficit by local borrowing during current financial year. In mid-October, the government had borrowed $450m on a short-term facility from a Credit Suisse led consortium of commercial banks to support dwindling foreign exchange reserves.

Sizeable external financing for plugging budget gap was expected to be carried out, but the deficit kept ballooning due to rising expenditures and due to slower growth in revenue collection. Contrary to borrowing from the central bank, the government has preferred obtaining financing from commercial banks as they offer better amounts in PIBs and treasury bills auctions.

From July 1st, 2017 till October 20th, 2017 the government borrowed Rs143b from banks and repaid 397b to them in same period last year, as per figures posted on SBP’s website. Also, the government prefers borrowing on short-term basis because of bank’s charging higher interest rates on long-term debt.

Experts opined government’s bank borrowing for the remainder of FY 2017-18, will remain strong. Although banks intend to diversify their lending portfolio’s besides placating their funds into government securities.

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