Karachi, September 20, 2023 – Pakistan secured a staggering Rs 2.14 trillion in funds through the sale of treasury bills during an auction conducted by the State Bank of Pakistan (SBP) on Wednesday.
The auction featured Market Treasury Bills (MTB) with maturities spanning 3 months, 6 months, and 12 months. Despite a substantial offering of Rs 4.58 trillion in the auction, the central bank accepted bids for the majority of the offering.
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Here is a breakdown of the funds raised through the accepted bids:
• Rs 2.04 trillion from the sale of 3-month MTBs
• Rs 165 million from 6-month MTBs
• Rs 1.22 billion from 12-month MTBs
Following the SBP’s decision on September 14, 2023, to maintain the policy rate unchanged, the cut-off yields for government papers witnessed significant reductions. In the latest auction:
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• The cut-off yield for 3-month papers decreased by 171 basis points to 22.7698 percent
• The yield for 6-month papers saw a 199 basis point reduction to 22.80 percent
• 12-month papers experienced a 217 basis point reduction to 22.9 percent
The government of Pakistan relies on treasury bill auctions to raise funds for budget financing. Financial institutions actively participated in short-term maturities during this auction.
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The challenging economic conditions have deterred fresh borrowing by the private sector, and banks have leaned towards investing their funds in government papers due to their safety. According to recent data from the SBP, the federal government borrowed Rs 1.51 trillion from the banking system from July 1 to September 8 of the current fiscal year, compared to Rs 999 billion during the same period in the previous fiscal year.
In contrast, the private sector has chosen to retire debt rather than seek new loans, with debt retirements totaling Rs 283 billion in the same period of the current fiscal year.
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The substantial funds raised through the treasury bill auction will play a crucial role in meeting the financial needs of the government and supporting budgetary requirements.
