KARACHI: The government raised Rs59.7 billion through Pakistan In­­vest­ment Bonds (PIBs) on Wednesday against banks’ bids of Rs115.2bn. The auction was not encouraging for banks as the government continued to raise small amount of money.

The highest amount of Rs93bn was offered by banks for three-year PIBs, but the government raised Rs59.6bn at a not-so-attractive cut-off yield of 6.4 per cent.

The banks have been investing heavily in the market treasury bills with low returns compared to PIBs which hit the profitability of almost all banks in 2016.

The government raised just Rs1 million for five-year and Rs26m for 10-year tenors. The long-term papers are not attractive for the investors since the inflation is gradually increasing that may compel policymakers to increase the key interest rate which has stayed at 5.75 per cent since March 2016.

The banks’ bids for the five-year and 10-yaer papers were Rs17.7bn and Rs4.3bn, respectively, while the bids for 20-year PIBs were rejected.

The low investment in government papers produced positive results for the economy since the advances by banks to the private sector have substantially increased during the current fiscal year. The private sector complains that banks were charging high interest rates in the name of covering high risks involved with the private sector.

Published in Dawn, February 23rd, 2017