Govt to borrow Rs6.8tr by April'25

The State Bank of Pakistan (SBP) has announced its auction calendar for Pakistan Investment Bonds (PIBs) and Market Treasury Bills (MTBs), targeting a total of Rs6.8 trillion in upcoming auctions. The calendar, issued by the Domestic Markets & Monetary Management Department, outlines the schedule and target amounts for both fixed-rate and floating-rate PIBs, as well as short-term MTBs.

The SBP plans to raise Rs2,900 billion through MTB auctions and Rs3,925 billion through PIBs, including Rs1,050 billion from fixed-rate PIBs and Rs2,875 billion from floating-rate PIBs, according to SBP data. These auctions will take place over February–April 2025, covering various maturities. Meanwhile, bond maturities during this period amount to Rs3,092 billion.

Economists say the SBP's plan to raise Rs6.8 trillion in just three months suggests a substantial fiscal deficit, highlighting the government's need to bridge the gap between revenue and expenditures.

Higher borrowing demand leads to increased interest rates, which can hinder the SBP's goal of reducing the policy rate, currently at 12%—one of the highest globally. Excessive government borrowing from commercial banks or the SBP could also increase the money supply, potentially fuelling inflation. The SBP has indicated that while inflation is decreasing, it may rebound from June 2024.

With heavy government borrowing, experts warn that banks may have less liquidity to lend to the private sector, hindering business expansion and reducing private investment, which could impact economic growth.

A rising reliance on PIBs and MTBs increases Pakistan's domestic debt burden. Struggles in revenue generation could lead to higher repayment costs and long-term fiscal instability.

Meanwhile, the Pakistani rupee depreciated by 0.03% in the inter-bank market on Monday, closing at 279.04 against the US dollar, marking a 9-paisa loss. Broad Money (M2) increased by Rs116 billion, reaching Rs35 trillion as of January 24, 2025.

On the global front, the US dollar strengthened, pushing the Canadian dollar and Mexican peso to multi-year lows, while China's yuan hit a record low due to fresh US tariffs.

Gold prices in Pakistan continued their record-breaking rally, reaching Rs292,400 per tola. International gold prices also rose, hitting $2,829 per ounce before stabilising.

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