Deficit financing: Government plans to borrow more than Rs 5,000,000,000 from banks in 3 months

KARACHI: The Federal Government has planned to borrow over Rs 5 trillion from the domestic banking sector over the next three months (April-June) of 2022 to finance the budget deficit.

The State Bank of Pakistan (SBP) has released four auction schedules for the sale of Market Treasury Bills (MTB), Pakistan Investment Bonds (PIB) and Ijara Sukuk (GIS) from the Pakistani government.

According to these schedules, the Federal Government intends to borrow an interim amount of Rs 5.3 trillion from the banking sector through an auction of security papers over the next three months to

meet their financial needs.

The Federal Government will raise 4 trillion rupees from the banking sector through the sale of 3-month, 6-month and 12-month Pakistani market treasury bills in April-June FY22. A total of 7 ATV auctions have been announced by the State Bank, one of which has already been carried out on April 6, 2022. The targeted amount includes Rs 3.6 trillion of maturity amount and an additional Rs 400 billion.

The federal government has planned to borrow some 1 trillion rupees through the sale of long-term investment bonds. Some Rs 350 billion will be borrowed through the sale of fixed rate GDP and another Rs 700 billion through floating rate GDP. Three fixed rate GDP auctions and seven variable rate GDP auctions will take place over the next three months.

An amount of Rs 300 billion will be borrowed against the government’s sale of Ijara Sukuk (GIS). This includes Rs 75 billion Sukuk at fixed rental rate (VRR) over 5 years and Rs 225 billion Sukuk at variable rental rate (VRR) over 5 years for all Islamic banks and commercial banks.

with Islamic banking branches.

Analysts said higher foreign inflows and healthy domestic revenue growth may reduce the government’s reliance on the domestic banking system to fund the budget deficit.

Copyright Business Recorder, 2022

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