Govt to borrow Rs1.35trln from banks

KARACHI: The federal government has planned to borrow Rs1.35 trillion from banks through the sale of market treasury bills (MTBs) and Pakistan Investment Bonds (PIBs) to finance its budget deficit during the first quarter of the current fiscal year, the central bank reported on Friday.
The government is set to raise Rs1.150 trillion by selling three-, six-, and 12-month treasury bills in July-September 2015/16 fiscal year.
Additionally, it will also mobilise Rs200 billion through the sale of three-, five-, 10-, and 20-year PIBs, revealed a latest auction calendar issued by the State Bank.
Analysts said the government continues to rely on borrowing from banks to finance its spending despite the strong foreign inflows.
The government borrowed Rs1.134 trillion from the banks for the budgetary support during July 1, 2014 to June 19, 2015 as against Rs179 billion during the same period of the last fiscal year, the provisional data on monetary aggregates showed.
The appetite for the investment in the government securities from the commercial banks remains high, which was evident from the fact that the treasury bills were oversubscribed in the auctions held during the previous month.
In the first T-bill auction, after the federal budget announcement in which higher taxes on banks were announced, cut-off yields were raised as banks bargained for a better price on the government securities to support their profitability.
After maintaining a declining trend for around four to five months due to persistent reduction in interest rate, the cut-off yields on T-bills started moving up in the auction held last month.
The significant increase in the government’s issuance of T-bills led to a decline in government borrowing from the SBP during the last fiscal year.