KARACHI: Liquidity was in pursuit of investment opportunities as banks and the corporate sector collectively invested Rs1.385 trillion in Treasury bills (T-bills) on Wednesday.
The government’s latest auction not only exceeded its target but also raised more than the amount maturing, reflecting strong demand for short-term government debt.
Despite the overwhelming demand, the government kept the cut-off yields unchanged, signalling that there are no expectations of an interest rate cut in the near future. This was evident from the market trends, as banks were keen to park their liquidity in longer-term 12-month bonds.
The highest bids, amounting to Rs556.5bn, were placed for 12-month T-bills, with the government raising the most substantial sum — Rs275.7bn — through this tenor. Additionally, the government raised Rs73bn for one-month bills, Rs41.3bn for three-month bills, and Rs23bn for six-month T-bills.
Banks and corporate sector invested Rs1.385tr in T-bills
The total bids for the auction amounted to Rs1.385tr, significantly surpassing the target of Rs450bn. The government raised Rs527bn, compared to the Rs445bn maturing in the current period. This surge in demand highlights the continued reliance on T-bills to meet the government’s funding needs, as banks and financial institutions seek secure, short-term investment opportunities.
Each year, the banks’ investment in government securities increases, largely due to the growing fiscal requirements of the government. In FY25, interest payments on government borrowings amounted to Rs9 trillion, accounting for half of the total budget outlay of over Rs18 trillion. This has created a challenging environment for government spending on developmental projects, as a significant portion of the budget is allocated to servicing debt.
It is also notable that while revenue collection has consistently increased in recent years, the government continues to claim that Pakistanis are not paying taxes. For the common person, taxes are levied at almost every stage of consumption, be it for goods or services.
Financial experts predict that the government will once again rely heavily on bank funding this year. Despite a rise in revenue, it still falls short of meeting the target, and experts warn that the government must carefully manage its spending to avoid excessive borrowing, which could further constrain revenue for critical development initiatives.
Published in Dawn, August 21st, 2025
