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Business Recorder
08-07-2025
- Business
- Business Recorder
Domestic banking sector: Pakistan govt sets Rs5.75trn borrowing target for Q1
KARACHI: The federal government has set a borrowing target of Rs 5.575 trillion from the domestic banking sector through the sale of government securities during the first quarter of the current fiscal year (FY26) to finance the fiscal deficit. This target represents a 40 percent increase compared to the first quarter of FY25, when the borrowing goal was set at Rs 3.970 trillion. The State Bank of Pakistan (SBP) on Monday issued calendars for the auction of Pakistan Investment Bonds (PIBs) and Government of Pakistan Market Treasury Bills (MTBs) for July-September period of this fiscal year. Securities' auction procedures: SBP unveils changes The government is intended to meet the major financing requirements through sale of short-term government security papers-MTBs. The federal government has planned to raise some Rs 2.4 trillion through sale of PIBs during the first quarter of this fiscal year. Some Rs 1 trillion will be borrowed through sale of PIB (Fixed Rate), Rs 1.4 trillion through PIB (Floating Rate) Semi-Annual auction. Auctions for PIB (Fixed Rate) will be held on July 16 and August 1, 2025 with a targeted borrowing of Rs 300 billion for each auction, while another Rs 400 billion will be raised in September 2025. In addition, some six auctions of PIB (Floating Rate) will be held during the first quarter of FY26 to achieve the borrowing target of Rs 1.4 trillion. The federal government also intends to raise Rs 3.175 trillion through sale of short-term government security papers during July-Sep of FY26. Overall, some 6 auctions of T-Bills to be conducted to meet the financing target. First auction of MTBs will be held on July 9, 2025 with a tentative target of Rs 1.35 trillion. Economists said the less than revenue collection has compelled the government to borrow more from the domestic resources to finance the fiscal deficit. They said that massive borrowing resulted in over Rs 8 trillion interest payments in this fiscal year. Copyright Business Recorder, 2025
Business Recorder
08-07-2025
- Business
- Business Recorder
Domestic banking sector: Govt sets Rs5.75trn borrowing target for Q1
KARACHI: The federal government has set a borrowing target of Rs 5.575 trillion from the domestic banking sector through the sale of government securities during the first quarter of the current fiscal year (FY26) to finance the fiscal deficit. This target represents a 40 percent increase compared to the first quarter of FY25, when the borrowing goal was set at Rs 3.970 trillion. The State Bank of Pakistan (SBP) on Monday issued calendars for the auction of Pakistan Investment Bonds (PIBs) and Government of Pakistan Market Treasury Bills (MTBs) for July-September period of this fiscal year. Securities' auction procedures: SBP unveils changes The government is intended to meet the major financing requirements through sale of short-term government security papers-MTBs. The federal government has planned to raise some Rs 2.4 trillion through sale of PIBs during the first quarter of this fiscal year. Some Rs 1 trillion will be borrowed through sale of PIB (Fixed Rate), Rs 1.4 trillion through PIB (Floating Rate) Semi-Annual auction. Auctions for PIB (Fixed Rate) will be held on July 16 and August 1, 2025 with a targeted borrowing of Rs 300 billion for each auction, while another Rs 400 billion will be raised in September 2025. In addition, some six auctions of PIB (Floating Rate) will be held during the first quarter of FY26 to achieve the borrowing target of Rs 1.4 trillion. The federal government also intends to raise Rs 3.175 trillion through sale of short-term government security papers during July-Sep of FY26. Overall, some 6 auctions of T-Bills to be conducted to meet the financing target. First auction of MTBs will be held on July 9, 2025 with a tentative target of Rs 1.35 trillion. Economists said the less than revenue collection has compelled the government to borrow more from the domestic resources to finance the fiscal deficit. They said that massive borrowing resulted in over Rs 8 trillion interest payments in this fiscal year. Copyright Business Recorder, 2025
Express Tribune
07-07-2025
- Business
- Express Tribune
Govt plans Rs4.9tr borrowing
The State Bank of Pakistan (SBP) has announced the auction calendar for Pakistan Investment Bonds (PIBs) and Market Treasury Bills (MTBs) for the third quarter of FY2025 (JulySeptember), targeting a combined amount of Rs4.875 trillion. The move is part of the government's domestic borrowing strategy aimed at meeting fiscal needs and managing public debt efficiently amid International Monetary Fund (IMF) restrictions on direct central bank borrowing. For fixed-rate PIBs, the SBP has scheduled three auctions with a total target of Rs1 trillion. These will be held on July 16 (Rs300 billion), August 1 (Rs300 billion), and September 4 (Rs400 billion). Available tenors include 2-year zero coupon, 3-year (10.50%), 5-year (11.00%), 10-year (11.50%), and 15-year zero coupon instruments. Alongside these, the SBP will conduct floating rate PIB auctions, with a cumulative target of Rs1.4 trillion. The first such auction is scheduled for July 9 with a Rs300 billion target, followed by several others across the quarter. Six auctions of MTBs are also planned during the quarter, aiming to raise Rs3.175 trillion. The auction dates are July 9 (Rs1,350 billion), July 24 (Rs300 billion), August 7 (Rs425 billion), August 21 (Rs325 billion), September 4 (Rs550 billion), and September 17 (Rs225 billion). The bills will be offered in 1-month, 3-month, 6-month, and 12-month tenors. The largest allocation, Rs950 billion, is reserved for the 12-month duration, reflecting a preference for medium-term borrowing. Meanwhile, gold prices in Pakistan dropped sharply on Monday, mirroring a decline in international bullion rates as the US dollar gained strength and investors responded to geopolitical developments, particularly an update on US trade policy. According to the All-Pakistan Gems and Jewellers Sarafa Association, the price of gold per tola fell by Rs2,500, settling at Rs353,000. The rate for 10 grams declined by Rs2,143, reaching Rs302,640. The rupee also recorded a slight depreciation in the interbank market, slipping by 0.09%. The local currency closed at 284.22, down by Re0.25 compared to the previous session's close of 283.97.
Express Tribune
02-07-2025
- Business
- Express Tribune
Inflation falls sharply, undercuts tight policy
Listen to article The government has surpassed its annual inflation target, which increased at a pace of 4.5% in the last fiscal year, mainly because of a slump in food prices, reinforcing the widely held independent view that the extent of monetary tightening was excessive and unwarranted. The Pakistan Bureau of Statistics (PBS) reported on Tuesday that the average increase in the cost of a basket of essential goods and services stood at 4.5% for FY2024-25 — well below the official target of 12% and far lower than initial projections by the International Monetary Fund (IMF) and other multilateral lenders. The IMF had initially forecast inflation at 15%, later revising it downwards. However, these elevated projections pressured the central bank to maintain double-digit interest rates, which ultimately hurt economic growth. The central bank has kept the interest rates at 11%, which are far higher than the headline and average inflation rates for the just ended fiscal year. This solely benefited the commercial banks at the expense of businesses and the federal government that gives away around half of the total budget in interest payments. The current approach of maintaining 11% rates, while allocating Rs7.2 trillion for domestic debt servicing, ensures continued economic stagnation, whereas regional competitors strengthen their industrial bases and export capabilities, according to the Economic Policy and Business Development (EPBD). The government has allocated a total Rs8.2 trillion for debt servicing, which is equal to 46% of the approved budget for this fiscal year, which began on Tuesday. The EPBD, an independent think tank, stated last week that the Rs7.2 trillion was going to the banking sector as guaranteed profits. With 59% of government debt in floating-rate instruments, reducing policy rates from 11% to 6% would generate immediate savings on the majority of debt stock, it added. It further said that the government compounded this burden by issuing Rs2 trillion in fixed Pakistan Investment Bonds at peak rates of 22% during the last two fiscal years and locked in excessive costs for banks' benefit, according to the statement. The think tank stated that by reducing the interest rates to 6% because of substantial reduction in the inflation rates, the government can immediately save Rs3 trillion in the debt cost. Even a small portion of these savings can help generate jobs by lowering the cost of doing business, according to EPBD. The average inflation rate in rural areas remained at 3.3%, while it ended at 5.3% in the urban centres, according to the PBS. The annual inflation rate also eased to 3.2% in June, which was in line with the Finance Ministry's projection for the month. In its monthly economic outlook report, the ministry reported this week that the inflation was projected to remain between 3-4% in June. With the fresh inflation rate, the gap between headline inflation and the key policy rate of the SBP has widened to 7.8%. The Monetary Policy Committee last month left the policy rate unchanged 11% despite a persistent decline in inflation. For the new fiscal year, the government has approved a 7.5% inflation target, which still provides further room for reducing the interest rates. Core inflation, calculated after excluding energy and food items, has eased both in cities and towns. The rate slowed down to 6.9% in cities and 8.6% in rural areas, said the PBS. Urban annual inflation eased to 3% and it slightly accelerated to 3.6% in rural areas last month. The PBS reports inflation data from 35 cities and covers 356 consumer items. In rural areas, it covers 27 centres and 244 consumer items. The data showed that food prices again decelerated after picking up pace a month earlier. The food inflation rate in cities slowed down 4.2% but slightly increased to 2.4% in rural areas. The government has failed to fulfil its promise of keeping the prices of sugar in check, thanks to the decision of allowing exports last year. Sugar prices jumped one-fourth last month compared to a year ago, according to the PBS. The increase in sugar prices is also contributing to higher tax collection, as the government has linked the 18% sales tax on sugar with the fortnightly inflation rate. Eggs became expensive by 25%, milk powder 22% and meat 11%. Onion prices were still lower by 56% compared to a year ago, followed by 23% reduction in prices of tomatoes and wheat 17%. Electricity charges were lower by 30% last month, compared to a year, petrol was still 2% cheaper than last year despite increasing taxes.
Express Tribune
22-06-2025
- Business
- Express Tribune
SBP seeks tax on foreign investment
Listen to article As the local currency comes under renewed stress, the State Bank of Pakistan (SBP) on Saturday proposed linking tax benefits with a minimum one-year retention period for foreign investments in government debt and equity markets to bring predictability in outflows. Dr Mohammad Ali Malik, an SBP executive, suggested the 10% reduced income tax rate should be tied to at least one-year retention of investment made through the Special Convertible Rupee Account (SCRA). He made the proposal during a meeting of the National Assembly Standing Committee on Finance, chaired by Pakistan People's Party (PPP)'s Syed Naveed Qamar. Federal Board of Revenue (FBR) Chairman Rashid Langrial said that investors were securing tax advantages by making short-term investments. He recommended a minimum six-month holding period for investments in Roshan Digital Accounts and other schemes to qualify for tax benefits. With this, the central bank seeks more predictable dollar outflows. However, the committee warned that such a move could deter investors, which the government could not afford. Dr Malik argued that the condition would not disrupt current inflows, as significant investments in treasury bills, government bonds, and SCRAs were not presently being made. He said linking tax incentives with long-term investments could help stabilise outflows. Under SBP regulations, non-residents may freely invest and trade in government marketable securities, including Pakistan Investment Bonds (PIBs), Treasury Bills (TBs), registered corporate debt instruments, and the Water and Power Development Authority (WAPDA)'s registered bonds through SCRAs. Following months of stability, the rupee has again come under pressure due to increased debt repayments. The rupee's value has depreciated to around Rs284 per US dollar in the interbank market, with even higher rates in the open market. A senior executive from a private commercial bank said large interbank transactions are being settled at nearly Rs3 above the average market rate. In an economic alert issued Saturday, advisory firm Tola Associates warned that ongoing unrest in the Middle East and Pakistan's reliance on imported oil posed serious risks of economic disruption. Crude oil prices, it stated, have surged over the past two weeks, rising from $63.76 on June 2 to $76.31 per barrel by June 19 due to the ongoing Gulf conflict. Tola Associates noted a dual inflationary impact on Pakistan's economy: higher crude prices widen the current account deficit and weaken the rupee against the dollar, which further fuels inflation. If crude oil hits $80 per barrel, the rupee may slide to Rs285.4 per dollar; if it rises to $100, the rupee could depreciate further to Rs292.1. In that case, local petrol prices may need to rise by Rs35 per litre, the firm said. The government has already formed a committee, chaired by Finance Minister Muhammad Aurangzeb, to review the implications of Israel's illegal act of war against Iran on Pakistan's economy and petroleum flows. Tola Associates said that the direct impact of higher crude prices on domestic petrol rates may further fuel inflation and make life more difficult for the people of Pakistan. It has estimated the additional impact of inflation by 1.8% in case crude oil price increases to $80 and 8.7% if the prices surge to $100. The current account deficit is also projected to widen to $4.3 billion in the next fiscal year, if crude oil hits $100 price. The standing committee also reviewed another proposal: taxing income from government debt investments even if withdrawn before maturity. Currently, some investors evade taxes by prematurely selling and rebuying securities — a tactic known as "coupon washing." The FBR proposed in the budget that tax be charged on the investment regardless of early withdrawal, estimating an additional Rs10 billion in revenue. However, the committee adjusted the proposal, reducing the required holding period from one year to six months. Last month, the FBR had discussed the coupon washing measure with the International Monetary Fund (IMF). But the IMF was sceptical that people who buy government securities do not pay taxes. Additionally, the committee approved raising the cash withdrawal threshold for non-filers — subject to a 0.8% tax — from Rs50,000 to Rs75,000. However, it rejected the FBR's recommendation to increase the tax rate to 1%, which had been 0.6% before the budget proposal.
