Having borrowed Rs 1.590 trillion during the first quarter, the cash-strapped government Wednesday made public its intention to borrow another trillion rupees from the primary dealers during the second quarter of FY13, ranging from October to December.
The government set its new rounded off budgetary borrowing target at Rs 1.215 trillion, marking a slump of Rs 375 billion compared to Rs 1.590 trillion it had borrowed from banks during the outgoing first quarter, July-September.
Earlier, in the fourth and last quarter of FY12, April-June, the government’s budgetary loan from the primary dealers was recorded at Rs 1.085 trillion. While the preceding third quarter, January-March FY12, had seen the State Bank auctioning the risk-free government securities to the tune of Rs 777 billion to cater the ever–burgeoning budgetary needs of the government.
Issued on Wednesday the central bank’s pre-announced auction calendar shows that during the second quarter the government would be raising from banks the targeted amount through the sale of Government of Pakistan Market Treasury Bills (MTBs) and Pakistan Investment Bonds (PIBs).
The SBP calendar shows that the government would be raising Rs 1.125 trillion through auctioning the t-bills while another Rs 90 billion would be borrowed through selling PIBs of 3, 5, 10 and 20 years maturity. Maturity period for the auctioned T-bills would be 3-, 6- and 12-months. Over Rs 65.04 billion and negative Rs 9.709 billion would be secured as an additional requirement.
The economic observers call it a sort of cyclical debt as the central bank, on one hand, is raising billions of rupees from banks for the government and at the same time is injecting huge sums into the rupee market on the other.
It was Monday last when the state bank pumped over Rs 562 billion into the banking system with Governor Yasin Anwar believing that many of the small banks would collapse if the regulator stopped injections.
The economic observers are concerned that much of the banking liquidity being sucked up by the cash-strapped government is being used for non-productive purpose such as running of the government. This trend, they warn, would leave the private sector sans cash thus dealing fresh blow to the government’s growth targets.
During the period under review, the central bank would be conducting seven auctions for selling the t-bills and three for PIBs.
The analysts said the cut-off yield on the government papers was depleting as since last 150bps rate-cut by the SBP the cut-off yield for T-bills has been subdued declining by 18 to 23bps. Also, in the latest PIB auction, the cut-off yield of the government papers was on the lower side, down by 45-67bps, against the precding auction.
The coupon rates announced Wednesday for the PIBs were 11.25 percent for 3-year, 11.50 percent for 5-year, 12 percent for 10-year and 13 percent for 20-year maturities.
“Current declining trend of the secondary market yield of different government papers suggest that the secondary market participants are expecting further monetary easing in the upcoming monetary policy,” viewed InvestCap analyst Abdul Azeem.
