KARACHI: In the first treasury bills’ auction of this fiscal year on Wednesday, the government raised Rs136 billion — Rs11bn more than the target of Rs125bn.

Details show that the banks invested most of their money in three-month T-bills which means they believe the interest rate could be changed in the coming weeks or months. The upcoming monetary policy statement is scheduled for July 19.

The banks invested Rs127bn out of their total investment of Rs136bn for three-month treasury bills, not taking any risk amid an uncertain interest rate scenario. They invested Rs7.9bn in six-month and Rs163 million in 12-month papers.

The government succeeded to reduce the fiscal gap in FY2013-14 while it is believed that the need for budgetary support would further fall during the current fiscal year. However, experts believe that the long-term borrowing by the investors could cause a serious problem for the government for the repayment.

Opinion: Reading the IMF

During the previous fiscal year, the government significantly slashed its borrowing through T-bills, but at the same time its long-term huge borrowing through Pakistan Investment Bonds (PIBs) created history and was widely criticised by economists and analysts. Investors put Rs1.7 trillion for 12-month PIBs during the second half (January-June) of 2013-14. The return on 12-month paper is 12.09 per cent which is certainly very high compared to 9.9pc of 12-month treasury bills.

Published in Dawn, July 10th , 2014