KARACHI: The government on Wednesday further increased returns on treasury bills by up to 40 basis points across tenors, marking the second hike in cut-off yields after the State Bank of Pakistan (SBP) increased its policy rate by 100bps to 11.50 per cent on April 27.

The government raised Rs950 billion against the auction target of Rs1 trillion. However, it received staggering bids totalling Rs2,556bn from participants.

Barring the one-month tenor, which saw an 11-bps cut, the yield on 12-month papers was increased by 40bps followed by 37bps for six-month, and by 3bps for three-month tenor.

While the government raised Rs581.3bn through the auction of the T-bills, it raised Rs368.4bn through non-competitive bids.

The State Bank, in its half-yearly report, said the banks were earning money mainly from government papers, thereby reducing the flow of liquidity to the private sector. Private sector credit grew by just 0.9 per cent in the first half of FY26 against 22.8 per cent of last year, reflecting the poor health of the economy.

The government has been borrowing heavily from banks and other corporations, which has significantly increased the domestic debt.

The debt servicing has been increasing each year, and last year it ate up more than Rs8tr, leaving little room for the federal government to spend on development.

Published in Dawn, May 14th, 2026