SBP raises Rs454 billion in PIB auction, exceeds target

KARACHI: The State Bank of Pakistan successfully raised Rs454 billion (approximately $1.6 billion) in a recent auction of Pakistan Investment Bonds (PIBs) held on Wednesday. This amount surpassed the target of Rs430 billion, while the cut-off yields decreased by 1 to 25 basis points.

Yields for the two-year bond fell by 25 basis points to 11.69 percent, while yields for the three-year bond remained stable at 11.89 percent. The five-year bond yields saw a slight decline of 1 basis point to 12.34 percent, and the yields on the ten-year PIB also decreased by 1 basis point to 12.79 percent.

An analyst pointed out that rising non-development expenditures are significantly affecting the budget, primarily due to increased mark-up payments, which surged by 42 percent in FY24 and are projected to rise by another 20 percent in FY25, potentially reaching Rs9.8 trillion.

SBP bolsters foreign exchange reserves with $3.8 billion purchase

However, substantial cuts in interest rates could help alleviate debt-servicing costs.

Additionally, the government has initiated a T-bill buyback programme funded by the profits from the State Bank of Pakistan, aimed at reducing debt levels. Analysts predict that these strategies may lower debt servicing to approximately Rs7.8 trillion, representing a 4.1 percent reduction from FY24’s Rs8.2 trillion, and considerably below the budgeted Rs9.8 trillion for FY25.