Business

Govt to borrow record Rs11.1 trillion in FY24 first quarter

Published

2 years ago

Farwa

Govt to raise Rs8.70 trillion via short-term paper auctions.
PIBs to allow govt to borrow Rs1.68 tn from commercial banks.
Markup expenses budgeted at Rs7.3 trillion for FY24.

KARACHI: As the government grapples with a ballooning budget deficit and a sluggish economy, the central bank’s auction calendar shows it plans to borrow a record Rs11.1 trillion rupees through treasury bills and bonds in the July-September quarter, The News reported Friday.

Most planned borrowing for the first quarter of FY24 will be done through Market Treasury Bills with maturities of three, six, and 12 months.

According to the auction calendar issued by the central bank on Thursday, the government will raise Rs8.70 trillion via short-term paper auctions.

The sale of Pakistan Investment Bonds (PIBs) with fixed and floating rates will allow the government to borrow Rs1.68 trillion from commercial banks.

It will borrow Rs450 billion via variable rental rate and Rs270 billion via fixed rate government of Pakistan Ijara Sukuk.

During July-September FY24, T-bills and PIBs worth Rs9.6 trillion will mature.

According to the Ministry of Finance, the federal budget deficit increased by more than Rs3.5 trillion in the first nine months of the current fiscal year due to a sharp increase in spending on debt servicing and defence requirements, which accounted for two-thirds of all expenditures.

Markup expenses have been budgeted at Rs7.3 trillion for FY24, up 85% from a year earlier.

Markup expenses are expected to grow on the back of higher interest rates that have been increased to tame inflation, along with higher borrowings by the government to plug fiscal deficit.

Due to the government’s expanding demand for funding, public debt is accumulating more quickly, and the stalled International Monetary Fund (IMF) Extended Fund Facility (EEF) — which expired on June 30 — dried foreign currency inflows.

Moreover, given poor revenue and high expenditure demands, the government was forced to increase its domestic debt.

The federal government’s debt increased 32% year-on-year to Rs58.962 trillion at the end of May.

At the end of May, the domestic debt surged by 28% year-on-year to Rs37.1 trillion.

Domestic debt rose by 19.2% during the 11 months of FY2023.

Similarly, foreign debt increased sharply by 40% to Rs21.9 trillion in May, while it grew by 31% in FY2023.

Last week, the government reached a staff-level agreement with the IMF for a $3 billion standby arrangement.

The eight-month delay in the agreement, awaiting IMF board approval in July, gives Pakistan some relief as it struggles with a severe balance of payments crisis and declining foreign exchange reserves.

The IMF agreement has reduced the nation’s risk of a short-term default.

Business

E&P Companies Will Invest $5 Billion in Pakistan’s Petroleum Industry

Published

1 day ago

Farwa

Over the next three years, local and foreign companies involved in Pakistan’s oil and gas exploration and production sector have shown a strong desire to invest more than $5 billion in the nation’s energy sector.

Recent changes to the Petroleum Policy and the implementation of an exclusive tight gas policy, which provide better incentives and a more investor-friendly regulatory framework, are credited with the increase in investor confidence.

These strategic changes are expected to boost domestic energy production, open up new avenues for growth, and draw large amounts of both domestic and foreign investment.

Business

With inflation slowing, the SBP is anticipated to lower the policy rate for the eighth time in a row.

Published

1 day ago

Farwa

Businesspeople anticipate another reduction in the policy rate when the State Bank of Pakistan’s (SBP) Monetary Policy Committee (MPC) releases the updated rate.

The interest rate for the upcoming two months will be announced by the central bank. It is still unclear if the rate will stay the same or be lowered to reflect stakeholder expectations.

According to experts, the policy rate will be lowered in order to further boost the nation’s economic sector.

Interest rates may be lowered for the seventh time in a row if the inflation rate declines significantly more than anticipated.

In its last six sessions, the MPC had cut the policy rate by 10 percent. In January 2025, it decreased the rate by one percent to 12pc.

12PC POLICY RATE

In January, the State Bank of Pakistan (SBP) announced cut in key policy rate by 100 basis points (bps) to 12 percent from 13pc in line with expectations of the business community.

The policy rate, which had been at 22 percent since June 2024, was slashed by 1,000 basis points to 12 percent.

The SBP governor said the decision was taken with careful consideration. “Although inflation is expected to decline next month (February), core inflation remains a pressing concern,” he stated.

Ahmed highlighted strong remittance inflows and robust export growth as key factors supporting the current account.