KARACHI: The first auction of Pakistan Investment Bonds (PIBs) in 2017-18 showed that the government is not interested in selling long-term bonds any more: it raised just Rs54.5 billion through PIBs although the maturing amount was Rs689.5bn.

The target for this auction was Rs100bn.

The auction result announced by the State Bank of Pakistan (SBP) on Wednesday indicated that PIBs, which remained the favoured instrument in the first three years of the present government, is no more a preferred tool for raising liquidity.

The government raised trillions of rupees through long-term PIBs at double-digit rates of returns. But they proved costly as inflation and the benchmark interest rate registered a steep fall.

The tenor of PIBs was three, five and 10 years. The stock of PIBs has been falling since 2015-16, yet it is still slightly higher than that of market treasury bills. PIBs held by banks and others amounted to Rs4.39 trillion at the end of June against market treasury bills worth Rs4.21tr.

The government raised Rs20.8bn for three years, Rs10.4bn for five years and Rs23.1bn for 10 years. No bid was received for 20-year bonds.

The government needs to raise additional Rs589.5bn to meet maturing PIBs of Rs689.5bn.

Published in Dawn, July 27th, 2017