KARACHI: The cash-starved government will raise Rs3,650 billion through treasury bills and the Pakistan Investment Bonds (PIBs) in June-August, said the State Bank of Pakistan (SBP) on Thursday.

The amount is almost equal to the revenue target for 2016-17.

The government relies heavily on domestic and foreign borrowings to meet rising expenditure. The government has allocated over Rs1 trillion for development next year, which will require higher revenues. But it seems the government will borrow more heavily to execute the Public Sector Development Programme (PSDP).

The SBP reported that Rs3.4tr will be raised through treasury bills in the next three months. The maturing amount of treasury bills during this period is Rs3.137tr. This means an additional amount of Rs262bn will be raised in the period under review.

In the case of PIBs, the government will raise significantly less than the maturing amount in order to bring down its bond holdings.

High-yield PIBs were launched to attract long-term investments. But the recent decline in the interest rate has made PIBs an unattractive borrowing instrument for the government. The outstanding stock of PIBs is Rs4.27tr. Banks hold Rs3tr of PIBs while the rest is held with non-banks and the corporate sector.

The government will raise Rs250bn through PIBs in the three-month period while the maturing amount is Rs734bn. Higher borrowing through treasury bills will help the government meet liquidity needs arising out of maturing PIBs.

For the last year and a half, the government has been trying to reduce the volume of PIBs, which often carry a double-digit interest rate.

With one month left before the end of 2016-17, borrowing for budgetary support has reached Rs849.5bn. This means borrowing can easily surpass the Rs1tr mark for 2016-17.

The government did not borrow from commercial banks this year as it relied mostly on the SBP.

The government changed its strategy again in May. Instead of retiring commercial banks’ debt, the government borrowed Rs109bn.

Analysts believe government borrowing from commercial banks can be higher in June since the budget for 2017-18 has already been presented.

Published in Dawn, June 2nd, 2017