Net government borrowings from the SBP stood at Rs685.8 billion between July 1 and December 13. PHOTO:FILE
The federal government’s net borrowing from the State Bank of Pakistan (SBP) for budgetary support amounted to Rs612.4 billion during July 1 and December 27, according to data released by the central bank on Tuesday.
There has been a gradual decrease in the federal government’s borrowing from the central bank over the last couple of months mainly due to an increase in its borrowings from commercial banks through market treasury bills.
Net government borrowings from the SBP stood at Rs685.8 billion between July 1 and December 13. They amounted to more than Rs800 billion until November 27.
In the last auction of market treasury bills held on December 24, the government raised Rs392.6 billion by selling bills of three and six months to a select group of commercial banks – known as primary dealers – at the cut-off yield of 9.95% and 9.97% respectively.
In the preceding two auctions held on November 28 and December 12, the government raised Rs546 billion and Rs531 billion respectively. This was in contrast with the earlier auction held on November 13 that could raise only Rs58 billion. It shows banks’ participation in the last three auctions of market treasury bills has increased substantially.
“The rising trend in interest rates is making government securities an attractive investment avenue for the banking industry,” said a recent research note by Invest Capital while referring to the hike of 50 basis points in the discount rate announced during mid-November last year.
Analysts attribute excess liquidity with commercial banks, which has supposedly led to their higher participation in treasury bills’ auctions, to an increase in their deposit base. As per the latest data released by the SBP, total deposits of the banking sector grew 12.7% to Rs7.5 trillion in 2013.
Currency in circulation
According to SBP data, currency in circulation has increased to Rs2.1 trillion as of December 27, up 11.8% from Rs1.9 trillion at the end of fiscal year 2012-13. This means the increase in the currency in circulation between June 30 and December 27 remained Rs229.9 billion as opposed to Rs218.9 billion in the corresponding period of the preceding fiscal year.
Credit to the private sector increased by Rs258.9 billion during the period under review as opposed to Rs73.2 billion in the corresponding months of the preceding year. Similarly, credit to public-sector enterprises amounted to Rs40.2 billion during June 30 and December 27 in contrast with Rs34.5 billion in the same months of the preceding fiscal year.
Published in The Express Tribune, January 8th, 2014.
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