The cash-strapped government has raised new debt worth Rs908 billion by selling debt securities, including Pakistan Investment Bonds (PIBs) and treasury bills (T-bills), to domestic commercial banks.
According to local research houses citing central bank data, the government borrowed significantly higher funds, amounting to Rs777 billion, through auctioning T-bills against the pre-auction target of Rs450 billion on Wednesday. This substantial borrowing through T-bills helped overcome the financing gap faced due to banks’ demands for higher rates of return on longer-tenure PIBs auctioned on Tuesday.
Banks had offered financing worth Rs1.68 trillion against the target of Rs450 billion, suggesting financial institutions held ample liquidity. The stable markup rate compared to the previous auction held two weeks ago allowed the authorities to secure higher financing. These funds will be partially utilised to repay the maturing debt worth Rs301 billion and to meet elevated expenditures, mainly for interest payments on the accumulated total debt.
The Ministry of Finance raised most of the funds against six-month T-bills at Rs459.5 billion, as the cut-off yield (markup rate) on these bills reduced by six basis points to 19.96% compared to the previous auction held on June 12, 2024. It raised another Rs221.9 billion through selling 12-month paper at a cut-off yield of 18.54%, down by 41 basis points from the previous auction. Additionally, it borrowed Rs95.3 billion against auctioning three-month paper at a stable cut-off yield of 20.15%.
Furthermore, the government borrowed another Rs131 billion through selling longer-tenure PIBs. However, the raised funds were lower compared to the pre-auction target of Rs190 billion. The Ministry of Finance secured Rs116.03 billion through selling three-year PIBs at a cut-off yield of 16.60%, down by four basis points from the previous auction. It raised another Rs13.90 billion against 10-year PIBs at 14.25%, reduced by five basis points from the previous auction. An additional Rs1.48 billion was borrowed through auctioning five-year paper at a stable rate of 15.44%. The ministry received no bids for 15, 20, and 30-year bonds. Commercial banks had offered total financing of Rs247 billion against the target of Rs190 billion.
The government continues to depend on domestic commercial financing to meet its expenditures, piling up debt amid lower revenue collection from taxes. On a year-on-year basis, however, the government has projected a 30% increase in tax revenue collection to Rs9.41 trillion in the outgoing fiscal year 2023-24 compared to the revised collection of Rs7.20 trillion in FY23. This surge in revenue collection is surprising given the moderate economic growth and massive slowdown in industrial activities during the year.
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