In order to meet its increasing financial requirements, a cash-strapped government plans to borrow a record amount of Rs 9.4 trillion from the local banking industry during the three months of 2023 (May–July).
According to analysts, the government is solely dependent on the domestic debt market and is steadily increasing its borrowing to cover the fiscal deficit in the absence of foreign support.
The policy rate is at a height of 21%, and the government’s domestic borrowing is now more expensive due to the restrictive monetary policy stance. They continued, “At the moment, the government is the biggest borrower from commercial banks.”
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A sizable portion of the borrowed funds will be used to pay back before debts are taken out from domestic banking institutions. In the next three months, government assets worth Rs 8 trillion will mature, and the federal government will pay this sum through new borrowing.
Six auction calendars for the sale of Market Treasury Bills (MTBs), Pakistan Investment Bonds (PIBs), and Government of Pakistan Ijara Sukuk (GIS) were released by the State Bank of Pakistan (SBP) on Friday.
These schedules indicate that the federal government intends to borrow an estimated Rs 9.44 trillion from the banking industry through an auction of security papers over the course of the upcoming three months to meet its budgetary needs.
In May-July 2023, the federal government would raise Rs 7.5 trillion from the banking sector through the selling of Pakistan Market Treasury Bills of three, six, and twelve months.
The State Bank has announced a total of seven MTB auctions on behalf of the federal government, one of which was previously held on May 3, 2023, and two more will be held this month, two in June, and two in July to meet the borrowing target. The amount of MTBs targeted includes Rs 7.084 trillion in maturing debt and an additional amount of Rs 416 billion.
According to the auction calendar, the federal government intends to borrow Rs 1.49 trillion through the sale of long-term Pakistan Investment Bonds (PIBs). During May-July of current calendar year, Rs 400 billion will be raised through PIB fixed rate, Rs 450 billion through PIB (Floating Rate) Semi-Annual Auction, and Rs 640 billion through PIB (Floating Rate) Quarterly Auction. In the next three months, Rs 674 billion in PIBs will mature.
During the following three months, an amount of Rs 360 billion will be raised through the auction of GOP Ijara Sukuk Fixed Rental Rate (FRR) and Rs 90 billion through the sale of GOP Ijara Sukuk Variable Rental Rate (VRR).