Pakistan Raises Rs 2.14 Trillion in Treasury Bill Auction

Pakistan Raises Rs 2.14 Trillion in Treasury Bill Auction

Pakistan has successfully raised a substantial amount of Rs 2.14 trillion through a recent treasury bill auction conducted by the State Bank of Pakistan (SBP), marking a significant financial achievement.

This auction included Market Treasury Bills (MTBs) with varying maturities of 3 months, 6 months, and 12 months. Despite offering a substantial sum of Rs 4.58 trillion in this auction, the central bank accepted the majority of the bids.

Here's 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 keep the policy rate unchanged, there were significant reductions in the cut-off yields for government papers in this auction:
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.

It's important to note that the government of Pakistan often relies on treasury bill auctions to secure funds for budget financing, and financial institutions actively participated in these short-term maturities during this auction.

Additionally, the current economic challenges have discouraged new borrowing by the private sector. Many banks have opted to invest their funds in government papers due to the perceived safety. Recent data from the SBP indicates that the federal government borrowed Rs 1.51 trillion from the banking system between July 1 and September 8 of the current fiscal year, a significant increase from the Rs 999 billion borrowed during the same period in the previous fiscal year.

Conversely, the private sector has chosen to retire debt instead of seeking new loans. Debt retirements totaled Rs 283 billion during the same period of the current fiscal year, reflecting the prevailing economic conditions.

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