KARACHI: The government raised Rs886.849 billion through auction of treasury bills held on Wednesday but was unable to meet the target set.

The auction of treasury papers was held for three-, six- and 12-month tenures with investors noticeably interested in the short-term bills.

The target of Rs1.5 trillion indicates the growing need for borrowing from the banks after the State Bank of Pakistan (SBP) stopped lending to the government, which was planning to raise an additional Rs896.714bn this auction while the maturing amount was Rs603.286bn.

Few money market dealers said the banks still fear the interest rate may go up in the next monetary policy due in September. The SBP had raised the policy rate by 100 basis points to 13.25 per cent in July, which the banks were not expecting.

The banks’ collective bids for three, six and 12 months were Rs936.508bn (face value) while they offered Rs838.749bn just for three-month T-bills. Meanwhile, the bids for six- and 12-month papers were Rs43.259bn and Rs54.5bn, respectively. The pattern reflects the uncertainty in financial sector regarding the future interest rate.

However, it appears that the government needs huge sums money from banks that may negatively affect the credit to private sector which has remained negative in July. The government raised almost 95pc money offered by the banks.

The government raised Rs803.090bn for three-month bills at a cut-off yield of 13.74pc per annum, Rs32.059bn for six-month at cut off yield of 13.95pc and Rs51.7bn at 14.24pc.

Published in Dawn, August 1st, 2019