Pakistan Raises Rs908 Billion Through Debt Securities

The government of Pakistan has taken significant steps to address its financial constraints by raising approximately Rs908 billion through the issuance of debt securities like Pakistan Investment Bonds (PIBs) and treasury bills (T-bills) to local commercial banks. This move comes as a response to the funding gap caused by banks' preference for higher returns on longer-term PIBs, leading to increased borrowing through T-bills.

Reports from local research firms, citing data from the central bank, indicate that the government borrowed a substantial amount of Rs777 billion through T-bills, surpassing the initial target of Rs450 billion. Banks demonstrated strong liquidity by offering financing of Rs1.68 trillion against the Rs450 billion target, highlighting the confidence in the government's borrowing strategy.

Utilization of Funds and Borrowing Details

The raised funds will be utilized to repay maturing debt of Rs301 billion and cover elevated expenses, primarily interest payments on the total accumulated debt. The Ministry of Finance strategically raised funds through various T-bill and PIB auctions, securing significant amounts at competitive cut-off yields.

For instance, the Ministry raised Rs459.5 billion through six-month T-bills at a reduced cut-off yield of 19.96%, Rs221.9 billion through 12-month T-bills at a cut-off yield of 18.54%, and Rs95.3 billion through three-month T-bills at a stable cut-off yield of 20.15%. Additionally, Rs131 billion was raised through longer-term PIBs, with varying cut-off yields for different tenures.

Government's Financial Outlook and Future Projections

Despite the government's increasing reliance on domestic commercial financing, concerns arise regarding the growing debt amid lower tax revenue collection. The government projects a 30% rise in tax revenue collection for the outgoing fiscal year 2023-24, aiming to reach Rs9.41 trillion compared to the revised collection of Rs7.20 trillion in FY23.

Conclusion

The government's recent borrowing strategy reflects its proactive approach to managing financial challenges and ensuring the sustainability of public finances. By securing substantial funds through T-bills and PIBs, the government aims to meet its financial obligations while striving for improved revenue generation in the coming years.