KARACHI: The government exceeded its borrowing target in the treasury bills (T-bills) auction held on Wednesday, raising Rs201.8 billion against Rs175bn, but kept cut-off yields largely unchanged. The auction saw bids surpassing Rs1tr, though the amount raised remained within the targeted range.

According to the State Bank of Pakistan (SBP), a total of Rs1,071bn in bids were submitted, with the government accepting Rs145.86bn in competitive bids and Rs56bn in non-competitive bids. This brought the total funds raised to Rs201.8bn. The SBP’s recent monetary policy statement revealed that it had provided Rs2.4tr to the government, which had helped reduce its reliance on borrowing from commercial banks.

In the July-August period of FY26, the government’s net debt retirement to scheduled banks stood at Rs39.9bn, compared to a net borrowing of Rs717.8bn during the same period in FY25. Despite a decline in overall borrowing from banks, financial institutions expect the trend to reverse soon. Analysts cite the economic strain caused by recent floods, which have increased the need for government liquidity to support flood relief and rehabilitation efforts. Additionally, revenue collection has fallen short of targets, further necessitating borrowing.

For the auction on Wednesday, the maturity amount was Rs197bn, and the government raised Rs201.8bn, surpassing this target. Investor demand was particularly high for one-month and 12-month T-bills. The highest bid was for one-month bills, with Rs414.3bn submitted, though only Rs11.7bn was raised. Conversely, Rs293.3bn was bid for 12-month bills, but only Rs2.8bn was accepted. The government raised Rs99.2bn for 3-month T-bills against Rs189.5bn in bids, and Rs32bn for 6-month bills against Rs174bn in bids.

Bankers noted that there was ample liquidity in the banking sector, with little private sector borrowing. Industry groups continue to call for a reduction in the benchmark interest rate, which has remained at 11pc since last Saturday. These groups argue that high rates, amid inflation hovering just above 3.2pc, are stifling investment and economic growth.

Meanwhile, analysts are forecasting inflation to rise in September, with estimates ranging from 6pc to 7pc, mainly due to the ongoing flood-related disruptions in the economy.

Published in Dawn, September 18th, 2025