Government plans to increase Rs5,9trln to finance budget deficit
KARACHI: Government aims to raise 5.9 trillion rupees through auction of market treasury bills (MTB) and Pakistani investment bonds (GDP) from June to August 2021 to finance a budget deficit, showed on Monday the auction schedule published by the central bank. .
The amount is more than the 5,000 billion rupees that the government wanted to recover between May and July. Between June and August, there will be seven auctions for three-month, six-month and 12-month treasury bills, with a target amount set at 5,000 billion rupees.
The government also plans to raise Rs 900 billion through BIP auctions during the reporting period. The State Bank of Pakistan (SBP) would sell Rs375 billion worth three, five-10-, 15-, 20- and 30 years of fixed rate GDP and Rs210 billion worth five, and Rs210 billion worth three-year variable rate GDP. It would also auction 105 billion rupees of GDP at variable rates over two years. The government secured sufficient funding from commercial banks through the issuance of short-term treasury bills and long-term GDP denominated in national currency to finance its budget deficit after its agreement with the International Monetary Fund (IMF) which restricts loans from the central bank to finance the deficit.
GDPs are also popular among foreign investors for their lucrative returns at a time of low interest rates around the world. The government’s domestic debt rose to Rs 25,552 billion in March from Rs 22,477 billion a year ago.
Pakistan’s budget deficit reached 3.5% of GDP in the nine months of this fiscal year, compared to 3.8% of GDP in the same period last year. The budget deficit is 0.6 percentage points lower than last year, despite higher interest payments and spending related to Covid.
The IMF, in one of its flagship publications – Fiscal Monitor, published in April, predicted that Pakistan’s fiscal position would remain under pressure during the current fiscal year with a budget and primary deficit at 7.1% and 1 % of GDP respectively and high debt levels at 87.7%. . However, the IMF estimated the budget deficit for next year (FY2022) at 5.5% and declining to 3.9% in FY2023.