Pakistani banks and companies invested a staggering Rs1.385 trillion in Treasury bills (T-bills) on Wednesday, seeking to park their funds in risk-free instruments. According to reports, the federal government’s latest auction exceeded its target, raising more than the amount set to mature.

 

This indicates a strong demand by the corporate sector for short-term debt. The high demand suggests that Islamabad could have slashed yield rates and potentially managed to bring in sufficient funds through the auction of T-bills.

 

However, reports reveal that the federal government did not reduce the cut-off yields, suggesting that the interest rate may remain fairly anchored in the coming periods. 

 

As per reports, banks have preferred longer-term 12-month bonds, which reveal their predictions about interest rates not increasing in upcoming monetary policy committee sessions. 

 

Data from reports reveal that bids worth Rs556.5 billion came for 12-month T-bills, with the federal government raising a whopping Rs275.7 billion through the 12-month maturity period. Islamabad also managed to raise Rs73 billion, Rs41.3 billion, and Rs23 billion from one, three and six-month bills, respectively.

 

As per the details, the auction managed to receive total bids of Rs1.385 trillion against the Rs450 billion target, exceeding by over 207 percent. The government reportedly accepted Rs527 billion against Rs445 billion maturing this period. 

 

For reference, the maturing amount refers to the sum the government must repay to previous investors in T-bills during this period. The strong demand underlined banks’ and financial institutions’ reliance on T-bills as secure short-term investments.

 

According to reports, banks continue to invest larger funds in government securities per annum as Islamabad’s fiscal needs grow. In the budget for fiscal year (FY) 2024-25, interest payments alone constituted half of the expenditure from the Rs18 trillion budget.

 

Details from reports suggest that the government is likely to rely extensively on bank borrowing during FY 2025-26. Even with the Federal Board of Revenue (FBR) exceeding revenue targets for the first month of FY 2025-26, experts predict that collections could fall short of targets, causing the government to borrow funds to plug the budget deficit.

 

Revenue collection has reportedly improved in recent years; however, Islamabad still reports that citizens and businesses alike continue to evade taxes.