Government intends to borrow Rs 1.4 trillion in Q2FY15

The federal government intends to borrow a healthy amount from the banking sector during the second quarter of current fiscal year 2014-15 (FY15) to meet it financial needs. The federal government has set a tentative borrowing target of Rs 1.4 trillion for October-December 2014 to be raised through the auction of Pakistan Investment Bond and Market Treasury Bills.
"Revenue shortfall and rising current expenditures have forced the federal government to continue borrowing from the domestic banking system," bankers said. The government reliance on domestic banking system is gradually increasing as foreign inflows are already on a slow track, they added.
The Federal Board of Revenue (FBR) is struggling to enhance its tax revenue collection and the collection growth stood at 14 percent with Rs 549 billion revenue collection in first quarter of this fiscal year, however according to analysts some 24-25 percent growth is required to achieve the annual tax target. The State Bank of Pakistan on Wednesday issued two calendars for the auction of Pakistan Investment Bond (PIBs) and Market Treasury Bills (MTBs) during the second quarter of FY15. According to these calendars the federal government would borrow Rs 1.395 trillion from the banking sector during October-December of this fiscal year.
The planned borrowing during the second quarter of FY15 is some Rs 395 billion higher than first quarter of FY14, in which the government announced to borrow some Rs 1 trillion. Bankers said during the first quarter of this fiscal year, the federal government has borrowed less than target and mainly focused the long-term bonds such as PIBs. Therefore, a higher target has been set for the second quarter.
According to the SBP, an amount of Rs 150 billion will be raised through the auction of 3-,5- and 10-year PIBs in October-December 2014. This includes some Rs 5.752 billion maturity and an additional amount of Rs 144.248 billion. Overall, three auctions will be held during the second quarter. The first auction will be held on October 22, 2014 with a target amount of Rs 50 billion. Another, Rs 50 billion will be raised through second auction, to be held on November 19, 2014 while the third auction will be conducted on December 17, 2014 for the same amount.
In addition, the government has planned to borrow Rs 1.245 trillion from the banking sector through the sale of Pakistan Market Treasury Bills of 3-month, 6-month and 12-month in the second quarter of FY15. The proposed amount includes Rs 1.012 trillion maturity and some Rs 233.343 billion additional amount. Auction for MTBs will be held fortnightly and total 7 auctions have been announced by the State Bank for the October-December period of current fiscal year. The first auction for T-Bills has already been held on October 1, 2014, in which the federal government has borrowed some Rs 36 billion against the target of Rs 150 billion.
The second auction will be held on October 15, 2014, with a tentative target of Rs 200 billion and the third auction on October 29 for Rs 200 billion. Two more auctions will be held on November 12 and November 26, 2014 for Rs 250 billion and Rs 260 billion, respectively. In addition, two auctions will be held in December 2014 with targets of Rs 100 billion and Rs 75 billion to be held on December 10, 2014 and December 24, 2014, respectively.