The government is set to finance the budget deficit caused by low revenues through the auctions of Market Treasury Bills (MTB), Pakistan Investment Bonds (PIB) and Sukuk from December 2021 to February 2022. The government will raise Rs. 6.90 trillion through the auctions, according to a report published in a leading national daily.
The government is looking to generate Rs. 6.75 trillion during the December-January period. The auctions of MTBs will help raise Rs. 5.60 trillion. The State Bank of Pakistan (SBP) will get another Rs. 1 trillion through the sale of PIBs, this would include Rs. 300 billion worth of fixed-rate PIBs and Rs. 350 billion worth of floating rate PIBs. A further amount of Rs. 350 billion will be generated through the auction of three-year and two-year PIBs.
The central bank will also raise Rs. 225 billion through the sale of variable rental five-year government-backed Ijara Sukuk. Whereas a further amount of Rs. 75 billion will be generated through the sale of fixed rental rate domestic Islamic bonds.
A fall in non-tax revenues and a widening budget deficit has forced the government to rely on the banking system to meet its spending requirements.
During the first quarter of the current fiscal year, the budget deficit rose to Rs. 745 billion compared to Rs. 529 billion during the same period last year. The budget deficit in the first quarter of the current fiscal year stands at 1.4 percent of the gross domestic product compared to 1.2 percent during the same period last year.
The higher planned borrowings from the domestic market are despite the revival of the International Monetary Fund’s (IMF) loan program. Last month Pakistani authorities and IMF reached a staff-level agreement on policies and reforms needed to complete the sixth review under the $6 billion Extended Fund Facility (EFF).
The approval of the agreement will make available 750 million in Special Drawing Rights (SDR), equivalent to $1059 million and also help unlock funding from bilateral and multilateral partners.