Finance Minister Muhammad Aurangzeb on Friday said the government had recently rejected the bids for treasury bills to convey a message that it was “under no desperation” and will “borrow at its own terms”.
According to a statement from the Finance Division, the minister passed these remarks in a meeting of the Economic Coordination Committee (ECC) of the Cabinet on Friday.
The development comes after the State Bank of Pakistan (SBP), following the federal government’s directives, rejected all bids of Pakistan Market Treasury Bills (MTBs) received in the auction held on Wednesday.
The government then raised Rs83 billion against a target of Rs200 billion through the sale of fixed local currency long-term Pakistan Investment Bonds (PIBs) on Thursday.
In the ECC meeting on Friday, the minister spoke about the rejection by the government of all bids for treasury bills on Wednesday, saying “the move was aimed at conveying the message that the government was under no desperation to borrow, and if it were to borrow, it would borrow at its own terms”, as per the finance ministry statement.
Aurangzeb also urged the banking system to focus on lending to the private sector.
He was quoted as saying that the 450bps cut in policy rate and the resultant ease in borrowing would help the government reduce its single largest expenditure of debt servicing, and create room for the banking sector to step up and lend aggressively to the private sector.
The finance minister noted that macroeconomic stability was not an end itself but a means to an end.
He called it the “basic hygiene” and the building blocks that provide foundation to the whole edifice.
“We would move in the right direction on the basis of this approach, and ensure gradual stability in the micro sectors as well,” he added.
Sugar export
During the meeting, the ECC considered a summary from the Ministry of Industries and Production regarding the export of 40,000 metric tons of sugar to Tajikistan.
Export of 40,000 tons of sugar to Tajikistan recommended
“In principle, the ECC approved the proposal; however, it directed that after further discussions with the Tajik entity, the final form of the sale agreement be brought back to the ECC for approval,” the statement read.
Additionally, the Ministry of Industries and Production, in conjunction with the Trading Corporation of Pakistan (TCP), would lead the process, it added.
The ECC also reviewed and approved another proposal from the Ministry of Industries and Production regarding the further export of 0.100 million metric tons of surplus sugar.
“The meeting was told that the price of sugar as per PBS data had shown a downward trend since July while sufficient stocks of sugar were available to meet domestic requirements up to January next year.
“After detailed discussions and deliberations, the ECC approved the export in line with the terms and conditions already decided by the ECC in its meeting on 13 June 2024.”
Technical Supplementary Grant
In another agenda item, the ECC also reviewed a proposal from the Ministry of Interior concerning the release of funds through a Technical Supplementary Grant for Project Implementation Letters of HQ Frontier Corps (FC), Khyber Pakhtunkhwa (South).
“The ECC gave approval for the funds amounting to Rs456.600 million, and it will be released as Grant-in-Aid to the Interior Division for onward disbursement to HQ FC (South) in D.I. Khan for construction of eight women facilities in tribal districts,” the statement said.
Current economic situation
At the outset, the finance minister also shared an update on the current economic situation.
He said the currency was now in “stable position” with foreign exchanges at a 26-month high at the back of “very resilient and strong remittances flows”.
The minister said the IT exports had also stabilised at about $300 million monthly figure, terming it a great news for the export sector.
He also lauded growth in the RDAs with $165 million inflows received last month.
Aurangzeb called the reduction in inflation to a single digit as “a big story”, hoping that it would further come down when the September data is released.
The finance czar described the situation with the current account as “very encouraging” and noted the surplus of $75 million achieved in August.
He hoped that with softer oil prices, a softer dollar, and an aggressive rate cut, the current account situation would “continue to be in a good position”.
The minister also referred to the IMF Board meeting scheduled on September 25, hoping Pakistan would hear a good news on and move on from there.
The ECC meeting was attended by Minister for Industries and Production Rana Tanveer Hussain, Minister for Power Sardar Awais Ahmed Khan Leghari (virtual), Minister for Planning, Development & Special Initiatives Mr. Ahsan Iqbal, Minister of State for Finance and Revenue Mr. Ali Pervaiz Malik, Deputy Chairman Planning Commission, Governor SBP, and Chairman SECP, along with Federal Secretaries and senior officers from the concerned ministries and divisions.