KARACHI: The government plans to borrow 6.775 billion rupees from the domestic debt market in August-October, the central bank’s auction schedule announced on Wednesday, to meet its financing needs.
It would raise 5,350 billion rupees through auctions of market treasury bills (MTBs) and 1,125 billion rupees through the sale of fixed and floating rate Pakistani investment bonds (PIBs).
The State Bank of Pakistan (SBP) would sell Rs 525 billion of fixed rate BIP and Rs 150 billion of five-year floating rate BIP and Rs 150 billion of 10 year BIP. It would also auction a floating rate GDP of Rs 150 billion over three years and a floating rate GDP of Rs 150 billion over two years.
The SBP would also sell 210 billion rupees worth of Pakistani government Ijara Sukuk five-year variable-lease domestic Islamic bonds and 90 billion rupees of fixed-lease domestic Islamic bonds.
In the fiscal year 2023 from August to October, Rs 6,384,000,000,000,000 of GDP will mature. The government is not reducing its domestic borrowing plan, despite expectations of securing an IMF bailout by the end of this month.
Pakistan’s debt and total debts increased by 25% year-on-year to Rs 59.7 trillion in the financial year that ended June 30, 2022. This increase was due to reckless policies and the currency devaluation. Public debt rose by 23.5% to 47.8 trillion rupees in fiscal year 2022. It jumped 3.145 billion rupees month-on-month in June, the biggest monthly increase ever recorded. Pakistan recorded a record budget deficit of 5.5 trillion rupees in the financial year 2022, exceeding the annual target of 4.4 trillion rupees. The increased spending needed to provide fuel subsidies, the delay in the resumption of the IMF program and the lack of external financing have contributed to the increase in public debt. The government has also borrowed heavily from commercial banks to fill the financing gap.
Yields on Treasuries and bonds remained stable in expectation of no change in interest rates during the next monetary policy review scheduled for next week.
“Primary market yields have remained virtually unchanged since the last MPC [Monetary Policy Committee] announcement in July. While secondary market yields have risen in line with the move in the policy rate since the MPC’s last announcement, and do not appear to reflect expectations of further rate hikes for now,” said Mustafa Mustansir, Head of of research at Taurus Securities, in a note.
“The SBP MPC is due to meet on August 22, 2022, and we expect it to keep the benchmark policy rate unchanged at 15%,” Mustansir added.
Raising interest rates would have a limited effect on tackling headline inflation, which was largely driven by supply-side factors, including rising fuel and energy prices, with a lagged effect on underlying inflation, he said.
“Furthermore, the pressure on the rupiah has eased significantly as Pakistan moves closer to the next disbursement from the IMF as well as tighter foreign exchange control by the SBP,” Mustansir added.