The State Bank of Pakistan (SBP) has shared its plan to borrow Rs6.8 trillion through auctions of Pakistan Investment Bonds (PIBs) and Market Treasury Bills (MTBs) over the next three months. This move reflects the government’s need for funds to cover its expenses and manage the fiscal deficit.
According to the auction schedule released by the SBP, the government aims to collect Rs2,900 billion through short-term MTBs and Rs3,925 billion through PIBs. Out of this, Rs1,050 billion will come from fixed-rate PIBs, while Rs2,875 billion will be raised through floating-rate PIBs. These auctions will take place between February and April 2025. Meanwhile, the bond maturities in this period stand at Rs3,092 billion.
Experts believe that such a large borrowing plan highlights the increasing gap between government revenue and expenditures. When the government borrows more, interest rates usually rise, making it harder for the SBP to reduce the policy rate, which is currently at 12%. Higher interest rates can slow down economic activity, making it more expensive for businesses to borrow and invest.
Another concern is inflation. While the SBP has noted that inflation is currently on a downward trend, it has warned that it may rise again from June 2024. Increased government borrowing can add more money into the economy, which may fuel inflation further.
With the government borrowing heavily, banks may have fewer funds available to lend to private businesses. This could slow down business expansion, reduce investment in industries, and negatively impact economic growth. A growing reliance on PIBs and MTBs also increases Pakistan’s domestic debt burden. If the government struggles to increase revenue, it may face higher repayment costs, leading to long-term financial instability.
At the same time, the Pakistani rupee saw a slight depreciation, closing at 279.04 per US dollar on Monday, losing 9 paisas in a day. Broad Money (M2) in the economy increased by Rs116 billion, reaching Rs35 trillion by January 24, 2025.
On the global market, the US dollar strengthened, causing currencies like the Canadian dollar and Mexican peso to drop to multi-year lows. China’s yuan also hit a record low due to fresh US tariffs. Meanwhile, gold prices in Pakistan surged to Rs292,400 per tola, following international trends where gold reached $2,829 per ounce before stabilizing.
These developments reflect ongoing economic challenges, with high government borrowing, inflation risks, and currency fluctuations shaping Pakistan’s financial outlook in the coming months.
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