Karachi: The government on Wednesday raised liquidity more than the quarterly target through auction of Pakistan Investment Bonds (PIB), indicating that borrowings from the private sector are now a high priority.
The PIB worth Rs197 billion were sold by the State Bank and the investors decided to put money for long 20-year bonds while the highest amount was invested for 3-year bonds. The quarterly target for Jan-March is Rs180bn.
Earlier the banks were shying away from invest in long term bonds but the change was noted in the auction as the investors engaged Rs60.3bn for the benchmark 10-year bonds. Even the 20-year bonds attracted Rs12.5bn.
The bonds of shortest tenure, 3-year, attracted a total investment of Rs81bn while Rs41bn were invested for 5-year bonds.
The government has been borrowing heavily from the banking system. The amount borrowed from the State Bank is still very high which is against its commitment to bring down the borrowing from the central bank at zero level at the end of each quarter.
The government kept borrowing from the private banks also. Only last week the government raised Rs713bn through auction of treasury bills which was much higher than its own target of Rs450bn set for that auction.
However, the threat to exceed the budget deficit is now higher with the rapid borrowing. The government wants to keep the budget deficit around 6 per cent of GDP while the IMF is also pressuring to reduce the deficit.
Bankers said that it’s a healthy sign that the government has decided to trade securities in the stocks market which would provide a depth to the debt for the government. It would be a good sign for the banks too as they have been allowed to trade the securities in the stocks, they opined.
Except for the FY-13, the banks remained with high profits. In the last fiscal the interest rate were reduced significantly which curtailed the banks’ income from t-bills and other securities.