Govt raises Rs1.57tr through T-bill auction

Commercial banks have increased their cost of financing to the cash-strapped government by a fresh 1 percentage point (ppt) to a record high of 21% on Wednesday, signalling that the finance market anticipates a further hike in the central bank’s key policy rate next month. The government raised debt worth Rs1.57 trillion, through auctioning three 12-month T-bills to commercial banks against its pre-set target of Rs1.8 trillion. Had the government decided to borrow more through the auction, the cut-off yield (financing rate for the government) would have spiked beyond the current financing price of 21%. The government, however, required Rs1.8 trillion to retire the maturing old debt to the banks. It did, however, raise another Rs307 billion by selling 2-year and 3-year Pakistan Investment Bonds (PIBs), against the pre-set target of Rs70 billion. Financial experts said that the surge in the rate of financing to the government is seen for two reasons: Firstly, the central bank increased its key policy rate by an aggressive 300 basis points (bpts) to 20% in a meeting last week, against market expectation of a 200bpts rise. Secondly, the aggressive surge in the rate of financing suggests the market anticipates another hike of 50-100 bpts in the next central bank meeting scheduled for April 4, 2023.