KARACHI, March 2: The State Bank on Wednesday increased the weighted average yield on six-month treasury bills by 39 basis points to 5.18 per cent, tightening interest rates further to fight inflation, according to the results of the auction.

The increase in the six-month bills yield means that exporters will get export financing from commercial banks at 6.5 per cent in April, up from six per cent in March, if the State Bank makes no change in the method for determining export refinance rate.

The central bank keeps the refinance rate for a month almost at par with the weighted average yield on six-month bills in the last month and allows banks to price export loans by charging a maximum spread of 1.5 percentage point over it.

Businessmen have been demanding de-linking of export refinance rate from the T-bills rates to ensure that export financing does not become too expensive and start hurting the growth of exports.

The auction of the bills attracted a total demand worth Rs71.195 billion, much higher than the sale target of Rs40 billion, but the central bank sold Rs15.82 billion worth of these bills to keep the average yield at a desirable level. Had it sold the targeted amount of the bills it would have to increase the yield further high.

The SBP has been increasing treasury bills rates since the start of the new fiscal year to combat soaring inflation. Inflation increased by 8.76 per cent year-on-year in seven months of this fiscal year against the revised full fiscal year target of seven per cent. Senior bankers say the central bank may have to make faster increases in interest rates in coming months to contain inflation.