The federal government has planned to borrow Rs 1.125 trillion from banking sector through auction of short term and long term investment bonds during the second quarter (October-December) of current fiscal year 2015-16 (FY16). Analysts said that as a part of domestic debt restructuring, the federal government has enhanced its reliance on the scheduled banks instead of State Bank of Pakistan (SBP) aimed at complying with SBP Act.
"For the last one year, the federal government's borrowing from the State Bank is already on decline; however the revenue shortfall and higher current expenditures compelled the government to continue to borrow from domestic banking for budgetary support," they added. Under the SBP Act (amended), the federal government's borrowing from the SBP is required to be repaid at the end of each quarter and existing debt stocks (as on 30th April 2011) to be retired in eight years ie till 2019. While, in case of not meeting these provisions, the Act also stipulates that the federal government will submit a statement to the Parliament giving detailed justifications.
The SBP on Friday issued two calendars for the auction of Pakistan Investment Bond (PIBs) and Market Treasury Bills (MTBs). According to these calendars, the federal government has planned to borrow cumulatively an amount of Rs 1.25 trillion form banking sector during October-December of FY16. According to the SBP, the federal government has planned to borrow Rs 150 billion through three auctions of PIBs, which include Rs 5.654 billion maturing amount and Rs 144.346 billion of additional requirement. First auction of 3-, 5-, 10- and 20-years long term investment bonds will be held on October 7, 2015 with target amount of Rs 50 billion. Second and third auction will be held in November and December.
In addition, the government intends to borrow Rs 1.1 trillion from banking sector through sale of Pakistan Market Treasury Bills of 3-month, 6-month & 12-month period. This target includes Rs 1.03 trillion maturing amount and an additional amount of Rs 69.263 billion for the second quarter of this fiscal year.
Auction of MTBs will be held fortnightly and totalled 6 auctions have been announced by the SBP for the October-December of current fiscal year. First auction of the bills will be held on October 15, 2015 for borrowing of Rs 175 billion. Second auction will be conducted on October 29, 2015 with borrowing target of Rs 250 billion. Two auctions of Rs 250 billion and Rs 150 billion each will be held on November 12 and November 26, 2015, respectively. During December 2015 an amount of Rs 275 billion will be borrowed through two auctions of MTBs. However, it is interesting to note that presently, the banking sector is facing liquidity shortage and SBP is injecting a huge amount into the banking system on weekly basis to support the banks.
Continued liquidity shortage forced the State Bank to inject over Rs 704 billion into the banking system on Friday (October 2, 2015). State Bank conducted its Open Market Operation (injection) on October 2, 2015 and received some 21 offers amounting to Rs 791.2 billion for 7-day at 6.03 percent to 6.10 percent rate of return. In response to the bids, SBP accepted 19 bids amounting to Rs 704.7 billion at a 6.04 percent rate of return.
Comments
Comments are closed.