The federal government has planned to borrow a record Rs 7 trillion from the domestic banking sector during first quarter of (July-September) of this fiscal year (FY20) to meet its financial needs. Analysts said that with limited external financing and continued revenue shortfall has compelled the federal government to enhance its reliance on the domestic banking system.
After massive borrowing of Rs 3.3 trillion from State Bank of Pakistan (SBP) during the last fiscal year, the federal government has also decided re-profiling of government debt from SBP to banking sector to meet the IMF condition, they said.
The State Bank has issued two calendars for the auction for Fixed and Floating Pakistan Investment Bond (PIBs) and one calendar for Market Treasury Bills (MTBs) for borrowing from banks during first quarter of this fiscal year (FY20).
According to these calendars, cumulatively the federal government will borrow some Rs 7 trillion form banking sector during Jul-Sep of FY20.
Auction for MTBs will be held fortnightly and totaled 7 auctions have been announced by the State Bank for the period under review. However, the SBP has given tentative target of six auctions and the target for the last auction of this quarter, scheduled on Sep 25, 2019, will be announced later.
Most of amount will be raised through auction of short term government papers. The government has planned to borrow Rs 6.3 trillion from banking sector through sale of Pakistan Market Treasury Bills of 3-Month, 6-Month & 12-Month in July-Sep of FY20.
The proposed amount includes maturing amount of Rs 5.065 trillion and an additional requirement of some Rs 1.234 trillion. First auction for the bills has already been conducted on July 3, 2019, while second auction is scheduled for July 17, 2019 for sale of Rs 600 billion worth MTBs. Third auction will be held on July 31, 2019, with a tentative target of Rs 1.5 trillion.
Two more auctions will be held on August 13 and August 28, 2019 for borrowing of Rs 2.6 trillion and Rs 500 billion respectively. Sixth auction for this quarter will be held on Sep 11, 2019 for 500 billion. According to the SBP, an amount of Rs 300 billion will be raised through auction of 3-, 5-, 10- and 20-year PIBs (Fixed Rate) and some Rs 400 billion through auction of PIBs (Floating Rate) during this quarter.
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