KARACHI: The State Bank repurchased Rs309.5 billion worth of five-year Pakistan Investment Bonds (PIBs) in its second buyback auction within four days, generating liquidity for investors.

Earlier, on April 20, the State Bank had carried out a similar buyback auction, repurchasing floating-rate five-year PIBs worth Rs285.3bn.

A buyback auction for five-year floating-rate PIBs is a mechanism through which the State Bank repurchases government debt securities from the market before their maturity, primarily to manage liquidity or reduce high-cost debt. The recent April auctions targeted floating-rate PIBs, enabling investors to sell bonds back through competitive bidding at cut-off prices.

Such repurchases provide immediate liquidity to investors and help stabilise the secondary market. They also encourage investors to reinvest in new bonds, thereby supporting government financing.

The government’s domestic debt — largely accumulated through PIBs — reached Rs56.679 trillion by the end of February 2026, rising by Rs2.2tr during the first eight months of FY26. Typically, borrowing increases in the final quarter of the fiscal year. State Bank data shows domestic debt grew by Rs5.657tr within 12 months from February 2025 to February 2026.

Of the total Rs56.679tr domestic debt, PIBs accounted for Rs35.362tr, or 62 per cent. These long-term instruments provide the government with some breathing space for repayments at maturity.

On Thursday, the State Bank accepted the full amount of bids totalling Rs309.5bn. The maturity date of these PIBs is May 6, 2026.

The government has also been borrowing aggressively from banks while cutting development spending. On April 15, it announced a reduction of Rs172.8bn in the federal development budget for FY26, bringing it down to Rs837.16bn.

Higher expenditure often forces cuts in development spending, which in turn affects economic growth. Despite efforts to accelerate growth, the rate has hovered around 3pc. The GDP growth target for FY26 is 3.5pc, but the reduction in development spending may make it difficult to achieve.

The government plans to raise Rs1.35tr through PIB auctions between April 28 and June 10 of FY26, against maturities of only Rs158bn during the same period. Additionally, it aims to raise Rs350bn through semi-annual PIB auctions.

Published in Dawn, April 24th, 2026