KARACHI: The government raised Rs2.29 trillion through treasury bill auctions on Wednesday, surpassing the target, as well as the requirement for the maturity of the bills.

The cash-starved government raised a total of Rs2.286tr, exceeding the target of Rs1.8tr. This amount also exceeded the required funds for the maturity of the treasury bills on the same day by 35 per cent. In fact, the government raised Rs596bn more than the required amount of Rs1.69tr for the maturity.

The government has been actively borrowing to address the revenue shortfall. According to a recent report by the State Bank of Pakistan, the government borrowed Rs3.147tr from scheduled banks during the first 10-and-a-half months of the current fiscal year, FY23.

The bidding trend also showed that banks are keen to invest in short-term three-month papers, anticipating a potential increase in interest rates in the upcoming weeks or months.

The total bids from banks amounted to Rs3.060tr. This trend reflects the banks’ preference to invest a maximum portion of their funds in risk-free government papers rather than lending to the private sector. Consequently, lending to the private sector has declined to just 2pc during the first 10-and-a-half months of this fiscal year.

The government kept the rates on the papers mostly unchanged. It raised Rs2.276tr for three months, the highest amount, at an unchanged rate of 21.99pc per annum.

For six months, the government raised just Rs4.15bn at a rate of 21.94pc, indicating a three basis points increase in the rate. Additionally, it raised Rs6bn for 12-month papers at a rate of 21.99pc.

The auctions of treasury bills were crucial as the government was grappling with a severe revenue shortage while preparing the new budget for FY24.

Published in Dawn, June 1st, 2023