Govt borrowing: State Bank of Pakistan claims contradict actual numbers.

ISLAMABAD -- The State Bank of Pakistan (SBP) has told the Monetary Policy Committee that the federal government prefers shorter term borrowings to finance its budget deficit - a claim that appears contrary to the facts.

The central bank's claim bring into question credibility of the data that is used by the MPC for making the most critical decision about the country's monetary policy.

The 'MoF (Ministry of Finance) is showing a preference for shorter tenors and tends to cap the one year MTB (Market Treasury Bills) yields,' according to the minutes of the last Monetary Policy Committee.

The market treasury bills (MTBs) and Pakistan Investment Bonds (PIBs) are instruments that the federal government uses to raise money from the commercial banks for budget financing. The federal government has estimated to borrow around Rs3.3 trillion this year, including from the external sources.

The data maintained by the Ministry of Finance about the borrowings tell a different story than what the central bank told the Monetary Policy Committee on January 28 when it met and decided to keep the interest rates unchanged at 13.25% with 7-2 majority.

SBP chief spokesman Abid Qamar told The Express Tribune, 'The MPC minutes mention that in terms of the residual maturity of marketable GOP securities the share of maturities with tenor up to three months has risen to 25.3% as per the then latest available data (ie Jan 22, 2020) as compared to 20.8% in Nov 21, 2019. Moreover, the share of maturities between 3-12 months decreased from 40% to 36.1% during the same time period. Please note that data used for this includes all fixed rate marketable government securities (excluding floating rate PIBs).'

In June last year, the size of marketable treasury bills was Rs4.9 trillion and almost 100% borrowing were against three-month tenor papers, according to the Ministry of Finance statistics. The MTBs borrowings increased slightly over Rs5 trillion and the three-month treasury bills share dropped to Rs1.7 trillion or 33% by December 2019 - 28 days before the MPC met, showed official statistics. This figure has further dipped to Rs1.4 trillion or 25% of total borrowings through short-term securities.

The total size of the treasury bills borrowings has increased to Rs5.6 trillion including Rs284 billion worth of treasury bills that are bought by the SBP.

The SBP stated that the residual maturity of the government securities with tenor up to three months has risen to 25.3%...