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KARACHI: The government will borrow Rs1.9 trillion from banks in the first quarter of the new calendar year mostly to meet domestic debt repayments.

The State Bank on Friday issued the targets set to be borrowed through the Pakistan Investment Bonds (PIBs), treasury bills (T-bills) and Ijara sukuk (Islamic bonds) during this quarter which happens to be the third quarter of financial year FY-16.

The repayment or maturity amount is so huge that the government is bound to borrow more from the same banking system. At the same time, the government has also been borrowing to meet the fiscal gap.

Rs1,6tr will be borrowed through T-bills auction during Jan-March, 2016

Details show that the largest amount of Rs1,600 billion will be borrowed through T-bills auction during Jan-March, 2016. The maturity amount of T-bills is Rs1,509bn which means the government will borrow an additional Rs90.8bn in the quarter.

Stock of banks’ investment in the T-bills was Rs2.6tr till the end of November 2015. Non-banks also invested Rs290bn to make the total investment in the T-bills as Rs2.92tr.

However, the banks have invested the highest amount in PIBs which collectively rose to Rs4.36tr at the end of November.

The government shifted its strategy by not borrowing through PIBs on large scale in the new fiscal FY-16, with the result that the size of borrowing was visibly slashed.

In the quarter Jan-March, the government will borrow Rs200bn through PIBs while the maturity amount will be Rs239bn. It means the government will make Rs39bn payments of PIBs through borrowing from T-bills.

Islamic banks were also provided a chance to invest in government papers. The government will borrow Rs100bn through Islamic bonds during the same quarter.

In a recent meeting held in Karachi, Minister of Finance Ishaq Dar criticised Islamic banks for not doing a better job and relying on the government for helping them through the issuance of sukuk.

The government’s borrowing from the banking system has been making new records. During July to mid December Rs641bn were borrowed through banks, reflecting both the fiscal gap and low revenue generations.

This massive outflow of Rs1.9tr from the banking system during Jan-March will not allow banks to make advances for the private sector which showed some positive signs during the last couple of months.

Private sector credit off-take rose to Rs168bn during five and a half months of the current fiscal FY-16 compared to Rs127bn in the same period of last fiscal.

Another report of the State Bank showed that they improved their deposits and added Rs699bn during the 11 months of calendar year 2015 while they invested Rs1,204bn in the government papers during the same period. It shows both the government and banks were not ready to invest in the economy.

Published in Dawn, January 2nd, 2016

Comments (15) Closed

AW Jan 02, 2016 12:02pm

The parliament needs to take stern and immediate action to formulate and pass laws which prevent the government from any further domestic or foreign borrowing. As a nation, we are already deep in debt with our future generations already mortgaged by irresponsible politicians and bureaucrats. We simply cannot afford the bloated government and the luxurious life styles of those who claim to serve us. The borrowing cannot go on like it is forever. The parliament needs to conduct serious reforms of the system of the government so it is forced to live within its means. The size of the government needs reduction by at least 50% by shutting down scores of unnecessary departments and ministries which have no relevance to public service. Perks of officials such as housing, cars and servants need to be eliminated to save limited national financial resources.

Adil Jan 02, 2016 12:12pm

The government short term borrowing of Rs1.9 trillion (US$ 19 billion) from banks in the first quarter shows the reckless fiscal management. This amount is the equivalent of entire forex reserves held in US Dollars. Technically government has eaten-up forex reserves by spending in PKR. On the other hand, private credits are picking up. Unless the banks increase deposits substantially (get back cash hoarding through amnesty scheme), this system will collapse very soon.

Dilectus Jan 02, 2016 12:43pm

Failed policies of failed PML-N government.

NS Jan 02, 2016 01:58pm

Does any one know the total borrowing sine Nawaz Sharif came to power and the total debt we have to live with.

msadiq Jan 02, 2016 02:28pm

@Dilectus we saw this in all recent bye and LG polls ! Keep dreaming mate !

A Pakistani Jan 02, 2016 02:40pm

A very nice strategy of PML-N. They borrow and spend. ORDINARY Pakistanis pay for several generations. I have yet to see any income generating scheme implemented bythem.

Pathetic ! Ishaq Dar and Nawaz Sharif

Antony Ooty Jan 02, 2016 03:06pm

Goodness me . This is more than the Pakistani economy itself. Austere measures is the need of the hour. Start with the defence spending. All the more the need for peace with India .

Toni Jan 02, 2016 03:20pm

Time to impose currency controls if Pakistan is stay afloat. After tight currency controls are in place, government may sell some assets to Central Bank to borrow required sums (i.e. government may resort to printing money). This is what Malaysia nearly did under Dr Mahathir during the financial crisis if i recall correctly.

abdullah Jan 02, 2016 03:37pm

Last couple of months every news article criticised that private sector was not given much credit and now i read that they had inproved.who to believe

Shahid Jan 02, 2016 11:32pm

1900 billion rupees a quarter, it has been like this since 2008. Add to it billions of USD being borrowed from abroad. How long can we do this before going down like Zimbabwe.

bk Jan 02, 2016 11:42pm

all this money will mke pakistan the richest nation on earth.

KHI93 Jan 03, 2016 09:26am

OMG. Borrow borrow borrow, left right, up down, centre. from every where this pathetic Govt. believes in sucking poor's blood by borrowing and filling their personal accounts.

I pray that they remain the rulers of such a country where such pathetic people live and vote for them.

M. Anwar Qureshi Jan 03, 2016 02:01pm

SBP is spineless; it must refuse loans to govt and advice them to limit restrict their expenses within their resources and revenues generations. Ministries and staff at all levels must be reduced by 50%; President House must be closed down and given one office in the PM House to save expenses. In Pindi-ISB all cars and vehicles must be withdrawn from govt officers and make them to travel by METRO BUS. How the public will invest in Pakistan while National Saving Schemes under MoF and Ishaq Dar is constantly reducing the profit rates and we the overseas workers senior citizens widows and investors are suffering. Similarly, if our profit rates are reduced, then Govt should also freeze the salaries of govt officials; no more increase even in the next budget; otherwise it will be a double standard. SBP should intervene and take some courageous steps.

M.Saeed Jan 03, 2016 09:46pm

There was a time during the first tenure of Mr. Nawaz Sharif when he introduced highly rewarding financial measures that resulted in positive impact on economy. Even India had adapted some of the measures, getting wonderful results. Perhaps, a revisit to those measures would prove beneficial again.

GAWAL MANDI YA Jan 03, 2016 10:33pm

The government can simply collect this money without borrowing(again) money,all they need to do is make all the politicians pay the realistic and actual amount of tax based on their income,profits and their holdings and properties,and please,no slick talking about "I don't own it" it belongs to so and so or it was a gift.Enough of this,everyone and their dog knows the truth