KARACHI: The State Bank of Pakistan (SBP) announced on Thursday that it would raise Rs5.15 trillion through auctions of government-backed short- and long-term securities over the next three months.

Most of the raised funds from primary dealers – mostly commercial banks – from September-November 2018 will be utilised to repay part of the previous domestic debt.

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As per details, the debt instruments – long-term Pakistan Investment Bonds (PIBs) of three, five, 10 and 20 years and short-term treasury bills of three, six and 12 months – getting matured in the next three months are worth Rs4.83 trillion, which comes to almost 94% of Rs5.15 trillion. The government will raise an additional debt of Rs310.98 billion, or 6.03%, in the targeted Rs5.15 trillion.

“Additional funds (Rs310.98 billion) will partly be used to finance budget deficit and partly to pay interest on maturing securities,” EFG Hermes Chief Executive Officer Muzammil Aslam told The Express Tribune.

The government, through the central bank, will raise Rs4.85 trillion through six auctions of T-bills from September-November 2018. During the same three months, T-bills worth Rs4.78 trillion will mature. It will raise Rs68.12 billion in additional funds from the T-bills’ auctions.

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Moreover, the government will raise another Rs150 billion through auctions of PIBs at a fixed rate of return of 7.25% on three-year bonds, 8% on five-year bonds, 8.75% on 10-year bonds and 10.75% on 20-year bonds, the central bank said. Out of the Rs150 billion, PIBs valuing at Rs92.85 billion will mature during the three-month period.

In addition to this, the government is aiming to raise another Rs150 billion through the auction of 10-year PIBs at a floating rate.

For the first time, the government auctioned PIBs at a floating rate of return worth Rs150 billion in May 2018 that market experts termed a smart and unique move to attract maximum possible funds. 

Published in The Express Tribune, September 7th, 2018.

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