KARACHI: The central government debt during the first seven months of the current fiscal year increased by Rs1.210 trillion to Rs32.997tr mainly on account of a double-digit increase in the funds raised through the Pakistan Investment Bonds (PIBs) auctions.

The total central government debt during the period under review rose by four per cent as the government continued to borrow funds from the domestic and external sources to fill the fiscal gaps.

Moreover, the government’s domestic debt – long- and short-term — saw a massive increase of 10pc to Rs21.79tr in January from Rs20.73tr at the beginning of the current fiscal year. Almost all of this increase came from the funds raised through the PIBs, as the total outstanding debt of these instruments jumped 13pc to Rs12.33tr at the end of January from Rs10.933tr in June, 2019.

Another significant increase in the long-term domestic debt came under the savings schemes — net of prize bonds – which increased from Rs2.99tr in June to Rs3.276tr in January, an increase of 10pc.

However, the domestic debt from prize bonds and foreign currency loans declined by 18pc and 5pc respectively.

On the other hand, the central government external debt rose 1pc to Rs11.20tr compared to Rs11.05tr in June, 2019. Even though, the long-term external debt had decreased by 3pc to Rs10.56tr, the huge 406pc or Rs515bn increase in the short-term external debt pushed up the overall figure.

The short-term external debt increased to Rs641.9bn from Rs126.9bn in June, 2019.

Investment to deposit ratio jumps 59pc

Around 59 per cent of the deposits held by the banks during February were parked in investments as banking sector took advantage of the higher yields on government papers.

The government instruments — treasury bills and the Pakistan Investment Bonds have remained the pick of bankers as they have parked maximum liquidity in these instruments given the high interest rates.

Total investments made by the banking sector during the month rose year-on-year by 16pc to Rs8.72tr compared to Rs7.49tr during the corresponding last year.

The banking sector deposits increased 16 per cent year-on-year to Rs14.81 trillion compared to Rs12.805tr during the corresponding month last year. However, deposits in the ongoing fiscal year rose by 2pc.

On the other hand, the advances to the banking sector showed lackluster growth as banks continue to shy away from loaning funds to the private sector to avoid non-performing loans (NPL) in the high interest rate environment. Advances of the commercial banks during the ongoing fiscal year rose by 1pc.

Published in Dawn, March 11th, 2020