KARACHI – The federal government would borrow Rs 1.19 trillion from the banking system to meet its heavy budgetary expenditures during fourth and last quarter of the current fiscal year.
Terming the government’s borrowing-prone tendency as detrimental for the economy, analysts believe that economic managers of the country should recover the “stolen” money, amounting to around Rs 700 billion instead of greater loans or slapping taxpayers with new levies.
The federal government would raise the targeted trillions by auctioning short- and long-term risk-free and high-yielded government papers and Islamic bonds to scheduled and Islamic banks during April-June 2011.
According to the pre-auction target calendars released by the State Bank on Thursday, the government had set a target of Rs 1.15 trillion – to be borrowed from scheduled banks through the auction of Government of Pakistan Market Treasury Bills (MTBs) of 3-, 6- and 12-month maturity periods. Whereas, some Rs 45 billion have been targeted to be raised from Islamic banks, which constitute around six percent of the country’s overall banking sector, by selling three-year Islamic bonds, or Government of Pakistan Ijara Sukuk in terms of Sharia banking. The State Bank has determined maximum value of the asset under the present issuance programme of the Islamic bonds at Rs 54.95 billion. The State Bank’s auction target calendar shows that the regulator would hold seven auctions on April 06, April 20, May 04, May 18, June 01, June 15 and June 29 to, respectively, realise 200, 225, 200, 150, 175, 150 and 50 billion rupees from scheduled banks.
Settlement dates for the above auctions have been set, respectively, on April 07, April 21, May 05, May 19, June 02, June 16 and June 30. Maturity dates for the auctioned MTBs would range from April 07 to June 30 this year, as per the State Bank calendar. Whereas, the central bank invited tenders on Thursday from the designated primary dealers in six Islamic banks of the country for auctioning the three-year Ijara Sukuk worth Rs 45 billion, in accordance with provisions of FSCD Circular No 15 dated Oct 29, 2010. The Islamic bonds would be auctioned on May 09 and subscription undertakings would be signed on May 11, while settlement date has been set on May 16. “The government should recover over Rs 600 to 700 billion, which have disappeared in pockets of corrupt politicians and bureaucrats,” said Asfar Bin Shahid.
Dubbing recovery of stolen money as a sole solution to Pakistan’s financial woes, the analyst said that there was a need for judging whether or not the government’s justification for more borrowings due to shortage of resources was genuine. “If it’s not, it (borrowing) is harmful for the economy,” he warned. The analyst was comforted with the fact that Islamabad was taking loans from scheduled and Islamic banks, and not the central one which, AB Shahid said, was more likely to resort to inflationary banknote-printing to cater the government’s ever-increasing budgetary
