However, it has been observed that during the first quarter of this fiscal year budgetary borrowings from the banking system remained subdued and the fiscal deficit was funded predominantly by domestic non-bank sources as well as external borrowings. Within the banking system, the government borrowed extensively from the State Bank, primarily to repay a large volume of its maturing debt held by the commercial banks.
The government borrowed significantly from the SBP to retire its bank debt, at the same time, reliance on non-bank sources (money market funds, pension funds and corporate) also remained higher than last year. In overall terms, the government retired Rs 1.4 trillion held by commercial banks during first quarter of FY19, while some Rs 1.518 trillion were borrowed from the central bank.
The State Bank of Pakistan (SBP) Friday issued three calendars for the auction of Pakistan Investment Bond (PIBs) Floating, PIBs Fixed Rate and Market Treasury Bills (MTBs). According to auction calendars the federal government has set a cumulative tentative borrowing target of Rs 3.85 trillion form domestic banking system during Feb-April period.
According to the SBP, the federal government plans to borrow Rs 250 billion through three auctions - PIBs Fixed Rate with Rs 446.769 billion maturing amount. First auction for 3-, 5-, 10- and 20-year long-term investment bonds will be held on February 20, 2019 with target amount of Rs 50 billion. Second auction will be held on March 20, 2019 for Rs 100 billion and third auction on April 17, 2019 for borrowing Rs 100 billion.
In addition, the government intends to borrow Rs400 billion through the auction for PIBs Floating Rate with maturing amount of Rs 4.63 billion and Rs 345.370 billion additional requirement. Three auctions of PIBs Floating Rate will be held on February 20, March 20 and April 17, 2018 with auction target of Rs 150 billion, Rs 100 billion and Rs 150 billion, respectively.
Some Rs 3.2 trillion will be borrowed from banking sector through sale of Pakistan Market Treasury Bills (MTBs) of 3-month, 6-month and 12-month period. Market Treasury Bills target includes Rs 2.969 trillion of maturing amount and Rs 230.194 billion of additional amount. The auction for MTBs will be held fortnightly and total 5 auctions have been announced by the State Bank for next three months. First auction for T-bills will be held on February 13, 2019 for sale of Rs 100 billion worth MTBs. Second auction has been scheduled for February 27, 2019 with borrowing target of Rs 2 trillion. Two auctions will be held on March 13 and March 27, 2019 with a target of Rs 100 billion and Rs 650 billion, respectively. Last auction of short-term bonds is scheduled for April 10, 2019 with target amount of Rs 350 billion.
Bankers said on a positive side, the net liquidity condition, due to lower borrowing by the government, enabled banks to cater for increased credit demand from private sector as well as PSEs during the first quarter, without any unwarranted pressure on the overnight rates.