KARACHI: The government borrowed less than half of its target in the latest auction of short-term treasury bills (T-bills) held on Wednes­day, despite strong interest from banks.

The State Bank of Pakistan (SBP) reported that the government raised Rs392 billion against a target of Rs800bn, marking yet another instance in the current fiscal year where borrowing remained below both the set target and maturing amount.

Since the beginning of the current fiscal year (FY25), the government has consistently borrowed less than the maturing amount of T-bills, indicating a shift away from accumulating short-term debt. However, long-term borrowing has been on the rise.

In Wednesday’s T-Bill auction, participation of Rs1.575 trillion was seen, with government raising Rs392bn as against the target of Rs800bn and maturity of Rs513bn.

The auction saw no change in cut-off yields except for 12-month bills, where rates increased by 26 basis points. With real interest rates now at 11 per cent, pressure is mounting on the SBP to cut interest rates.

According to media reports, the government plans to borrow Rs400bn from banks to reduce circular debt but is seeking a rate of 11pc — one per cent lower than the policy rate. Banks, however, remain reluctant to lend at this rate.

PIB auction

Meanwhile, the government raised Rs762bn through the auction of Pakistan Investment Bonds. In this semi-annual auction, Rs721bn was raised for 10 years while Rs97bn was raised for five years. The remaining amount was raised through non-competitive bids.

The growing volume of PIBs is a clear indication that the government is piling up long-term debt.

Published in Dawn, March 20th, 2025