PML-N govt borrows Rs 226b from banks

The cash-strapped federal government embarked on a renewed borrowing spree on Wednesday to ensure a smooth sailing in terms of running of the government, a head that absolves much of the government’s borrowed money.
The day saw the State Bank of Pakistan borrowing over Rs 226 billion from the primary dealers, nine banks and an investment firm, to be forwarded to the funds-starved federal government to cater the latter’s ever-burgeoning budgetary expenditures, mostly non-developmental thus unproductive.
The bank raised the fresh billions through auctioning market treasury bills (MTBs) of 3-, 6- and 12-month maturities.
The otherwise liquidity-scarce primary dealers, means the banks, offered to the government cash in excess of Rs 235 billion.
Prone to invest in the risk-free government papers, the dealers invested over Rs 184 billion in three month’s maturities, Rs 37 billion in six months and only Rs 4.5 billion in the long-term 12-month t-bills.
Whereas the analysts, including the State Bank, has been critical of the bank’s risk-averse behaviour, the latter seem to have decided to walk on the same path they mostly walked on during past five year’s of PPP reign.
The official data reveals that the banks’ advances to the private sector, which is considered to be the engine of growth that generate economic activity in developing countries like Pakistan, were recorded at zero during just-concluded FY13.
The Ministry of Finance, however, accepted bid worth Rs 226 billion in the FY14’s first MTB auction.
The government borrowed the money from the banking system at the rate of 8.9747, 8.9729, and 8.9817 percent for the 3-, 6- and 12-month securities, respectively.
For the ongoing first quarter of FY14 the resource-constrained federal government has set a bank borrowing target of over Rs 1.75 trillion that would be raised through the sale of MTBs, Pakistan Investment Bonds and the Ijara Sukuk.