Govt is planning to raise Rs7 trillion through bonds

Karachi: On Wednesday, the government borrowed Rs218.3 billion against the target of Rs175 billion by selling long-term – 3-year, and 5-year Pakistan Investment Bonds (PIBs).

The PIBs cut-off yields down by eight basis points on the 3-year bond and 30 basis points on the 5-year bond after a long time. The fall created space for the government to borrow more than its set target as the demand for financing got high.

Experts said that commercial banks have revised their cut-off yields in the recent auction of PIBs. The central bank maintained the vital policy rate unchanged at 15% for the next seven weeks.

While banks increased the rate to 15%, which may be revised down in future monetary policy statements, the banks have parked maximum amounts in the long-tenure PIBs at the prevailing fixed rate of return. In the latest auction, the banks had offered Rs662 billion against the government target of Rs175 billion.

On the other hand, the government has set a target of increasing Rs7.025 trillion by selling three-month to 12-month T-bills, three-year to 30-year PIBs at fixed and variable rates, and Sukuk (Shariah-compliant bonds) over the next three-month period.