KARACHI: The government raised Rs162 billion through the auction of Pakistan Investment Bonds (PIBs) at reduced cut-off yields on Tuesday.

       It remained below the target of Rs190bn but much higher than the maturing amount of just Rs3bn on the same date.

       The government has accumulated the largest debt through auctions of PIBs. The State Bank’s data showed that the borrowing through PIBs increased by Rs2.967 trillion during the first five months of 2023-24.

       During a year from November 2022, the borrowing through PIBs jumped by Rs5.514tr or 28.3 per cent. The PIBs now account for 61pc of the total domestic debt, which was Rs40.955tr in November 2023.

       Borrows Rs162bn more at reduced rates in latest PIBs auction

       In the latest bond auction, the government raised Rs81.1bn for three-year tenor, Rs40.6bn for five-year and Rs1.5bn for 10-year. The cut-off yields, however, were slashed by 40 basis points to 16.80pc for three-year, 38bps to 15.50pc for 5-year and 50bps to 14.50pc for 10-year bonds.

       The government raised Rs123.2bn through auction and Rs34.333bn through non-competitive bids making the total at Rs162.1bn.

       Since the PIBs constitute 61pc of the domestic debt, the cost of borrowing is too expensive for the economy. The successive governments have consistently been receiving criticism for long-term costly borrowing from 2013 to 2018. However, the first five months (July-November) of FY24 witnessed a surge of Rs2.967tr in borrowing through PIBs.

       Long-term borrowing at high rates becomes more problematic for governments as they have to allocate more than half of the total budget outlay for servicing these debts.

       Though the caretaker government collected a record revenue during the first half of the current fiscal year, the accumulation of huge debt reflects the extensive spending by the government.

       Published in Dawn, January 17th, 2024