The Ministry of Finance on Wednesday rejected all the bids valuing over Rs 23 billion received by the central bank against the auction of Pakistan Investment Bonds (PIBs). For Wednesday’s auction, the State Bank of Pakistan (SBP) had called for bids against the government securities of 3, 5, 10 and 20-year maturities. The lenders refrained from investing in the long term, 20-year securities, offered bids worth Rs 23.674 billion in total. The bidders offered Rs 12 billion against the 3-year security, Rs 6 billion against Rs 5-year and Rs 5.8 billion against the 10-year sovereign papers. However, the Ministry of Finance, which had been borrowing money from the banks and other lending institutions to bridge the cash-strapped government’s ever-widening fiscal deficit, rejected all the bids. The coupon rates were set at 11.25, 11.50, 12 and 13 percent respectively, for the 3, 5, 10 and 20 years maturities. When asked as to why all the bids were rejected by the central bank for Wednesday’s auction, SBP’s chief spokesman restricted his reply only to the confirmation and clarification that the rejection had come from the Ministry of Finance. “It is decided by the government,” the spokesman said. However, there was a perception that the bids were rejected owing to the depletion of discount rate to a single digit, 9.5 percent, while the coupon rates for the securities on sale were relatively much higher from 11.25 to 13 percent. Had this auction materialised, the lending would have cost the funds-starved government over Rs 1.261 billion on account interest.
