Government to borrow Rs4.8tr from commercial banks


KARACHI:

The government plans to borrow Rs.480 trillion from commercial banks over the next three months against the issuance of its sovereign bonds such as Pakistani investment bonds (GDP), treasury bills to partially repay the previous debt and partly to finance its projects.

The breakdown suggests that the finance ministry is expected to repay 3.9 trillion rupees against treasury bills maturing three to 12 months and GDPs (for example, three to 20 years) from September to November 2021, according to the central bank. from Pakistan. Friday.

The remainder of the amount raised at Rs872 billion “could be used to finance new and / or ongoing development projects (like roads and dams), finance defense needs and issue funds to various ministries,” Arif said. Habib Limited, Tahir Abbas Research Director. while speaking to The Express Tribune.

The government has to take on debt to finance projects as a result of the relatively low collection of tax and non-tax revenues compared to the current needs for funds in the economy which is in expansion mode.

Read Government to borrow 103.8 billion rupees from banks

The latest debt planning (Sept-Nov) suggests that the government is gradually implementing its strategy to raise more debt by auctioning longer-term securities like GDPs (for example, of two at age 30) and reducing its dependence on short-term debt. instruments like treasury bills.

In addition, it would increase some of the long-term debt by issuing GDPs at a variable interest rate (variable rate of return) instead assigning a fixed rate of return on the investment.

The changes in strategy are aimed at lowering the cost of borrowing, making the debt profile sustainable, and giving the government enough time to increase the number of taxpayers until long-term bonds mature.

The breakdown suggests that the government would raise 450 billion rupees by issuing 3 to 30 year GDPs at a fixed rate of return ranging from 7 to 11% for a maturity of just 18 billion rupees between September and November 2021.

It would raise an additional 450 billion rupees by issuing two to five year variable rate GDPs between 7.2293 and 7.6463% against zero maturity, as they were still relatively new to Pakistan.

According to the central bank, this would raise 3.90 trillion rupees against the issuance of three to 12 month treasury bills against the maturity of these bonds amounting to 3.9 trillion rupees. “Debt is used to finance and budget deficit,” Abbas said.

Read more SBP hits eight banks with penalties

The government has set an economic growth target of 4.8% for the current fiscal year 2022; started on July 1. To this end, he announced a budget amounting to Rs8.5 trillion.

The expenditure was to be financed through targeted revenue collection of 5.82 trillion rupees and borrowing (budget deficit) worth 3.42 trillion rupees.

The government has set the budget deficit target at 3.4 trillion rupees (6.3 percent of GDP) for the current fiscal year 2022 compared to 7 percent last year. It aims to raise 17.4% higher tax revenue through the Federal Board of Revenue (FBR) to 5.82 billion rupees in fiscal year 22, compared to 4.96 billion rupees in exercise 21.

Pakistan’s total debt and liabilities (including external debt and private sector debt) reached Rs 47.82 trillion in the fiscal year ended June 30, 2021, compared to Rs 44.59 trillion. June 30, 2020.

In terms of a percentage of GDP, however, it fell to 100.3% in FY21 from 107.3% in FY20, while the economy grew by 4% in FY20. in FY21 versus a 0.5% contraction in FY20 in the midst of Covid-19.

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