Govt executes Rs 351 billion T-Bill buyback to reprofile debt

The government repurchased Rs 351 billion worth of market treasury bills in an auction on Monday, marking the first step in addressing large maturities due in December 2024 and reducing domestic debt servicing costs. 

This move is part of the government’s strategy to reprofile short-term debt and leverage liquidity from the recent State Bank of Pakistan (SBP) profit transfer.

The repurchase of T-bills, set to mature in December 2024, amounted to Rs 351 billion, against a target of Rs 500 billion. The operation was supported by the recent State Bank of Pakistan (SBP) profit transfer, which bolstered the government’s liquidity. 

According to the State Bank of Pakistan, the yield on six-month T-bills maturing in December was around 16%, with 12-month notes offering similar rates. The buyback saved the government Rs11.66 billion in debt servicing costs. 

The SBP has cut its benchmark interest rate by 450 basis points since June, now standing at 17.5%. The repurchase is expected to enhance market liquidity, inject capital into the financial system, and potentially stabilize borrowing costs for the private sector. 

The buyback indicates the government’s improved liquidity position following a Rs2.7 trillion profit transfer from the SBP for FY24. In the last auction of T-bills, all bids were rejected, setting the stage for the government’s buyback.