The resource-constrained federal government has set a target of over Rs700 billion to be borrowed from the risk-averse commercial banks during the third quarter of current fiscal year. According to State Bank of Pakistan’s (SBP) auction calendars, the federal government would be borrowing Rs575 billion, Rs50 billion and Rs50 billion during January-March FY2012, respectively, through auctioning the government of Pakistan’s Market Treasury Bills (MTBs), Pakistan Investment Bonds (PIBs) and Ijara Sukuk. The federal government has also targeted to raise Rs69.507 billion, Rs3.447 billion and Rs29.566 billion, additionally, during the third quarter through selling the government securities. During the period in review, the central bank would be conducting six auctions; two auctions in one month, on January 11, January 25, February 8, February 22, March 7 and March 21, to sell treasury bills worth Rs75 billion, Rs75 billion, Rs125 billion, Rs75 billion, Rs100 billion and Rs125 billion on the respective dates.
Settlement dates for the six auctions have been set at January 12, January 26, February 9, February 23, March 8 and March 22, respectively. Maturity dates for the auctioned government papers would be the same. Whereas, the amount targeted against the auction of PIBs and Islamic bonds would be raised on February 14 and 23 and March 15. Maturity periods for MTBs would be of 3, 6 and 12 months, while that of PIBs and Ijara Sukuk would be of 3, 5, 10 and 20 year and 3 years, respectively. The coupon rate for PIBs of various maturities would range from 11.25 to 13.00 per cent. Bids would be invited separately on each auction day by domestic markets and monetary management department of SBP.
The economic observers are concerned as the cash-strapped governments, both in the center and provinces are heavily relying on banks for catering their ever-increasing budgetary needs. Only the third quarter would see the government sucking over Rs777 billion from the banking system. And if the government kept the same pace, the borrowed amount would accumulate to Rs3.11 trillion at the end of this fiscal year. According to SBP, the banks’ advances to the government, which are to be used for non-productive purpose of running of the government, amount to Rs849.701 billion during July 1 and Dec 23 of this year.
The analysts warn that this trend would leave the private sector without liquidity thus risking the government’s target for economic growth for FY12.
