The cash-strapped federal government Wednesday borrowed over Rs 37 billion from the banking system to cater its ever-burgeoning budgetary needs. The federal finance ministry raised the amount through the central bank which auctioned the Pakistan Investment Bonds (PIBs) of 3 to 20-year tenors. The central bank held auction of PIBs of 3-, 5-, 10- and 20-year maturity on Wednesday with, respective, coupon rates of 11.25, 11.50, 12 and 13 percent and the settlement date of September 27. In response to the auction, the primary dealers, comprising mostly the otherwise cash-strapped banks, bid a surplus amount of Rs 86.400 billion their prime focus being in the short-term, three years, bonds against which over Rs 33.040 billion were offered. The bidders tended not to go for long term investment as they did not bid against the 20-year papers at all. However, of the bids offered the State Bank accepted bids having a face value of Rs 37.501 billion with per annum effective Weighted Average Yield ranging from 10.5635 percent to 11.5776 percent. The fresh borrowing might be comforting the now funds-starved government which would however have to repay the borrowed amount along with interest amounting to Rs 797.961 million over a decade coming ahead. The resource-constrained governments in the center and provinces have extensively been borrowing from the scheduled and central banks leaving little or no liquidity with the latter for the growth-oriented private sector.
