ISLAMABAD: The borrowings during the tenure of the caretaker government from August 17, 2023 to January 31, 2024 have been reduced as compared to the preceding period from February 01, 2023 to August 16, 2023.
According to press statement issued by Finance Ministry here Thursday, the borrowings raised in the last few months were made to meet debt repayment obligations including principal and interest expense liabilities as caretaker government focused primarily on fiscal consolidation measures including revenue mobilization and expenditure rationalization.
The statement said that caretaker government inherited a policy rate of 22 percent, which is highest ever since 1972, adding the average policy rate during preceding period was almost 19.5%.
Over a short stint, with careful debt management operations, caretaker government has managed to improve domestic debt profile by: (i) extending maturity of government securities; (ii) raising debt on margin below the policy rate; and (iii) tapping non-bank and retai
l investors through capital market.
According to the statement, focus was on reducing borrowings from government securities through the banking sector. The borrowing through government securities fell by 67 percent in the caretaker government’s term as compared to the preceding period.
The interim government successfully retired short-term Treasury Bills amounting to Rs 1.6 trillion, contrasting with around Rs 3.3 trillion raised in the preceding period. This helped in reducing the gross financing needs of the government.
The caretaker government shifted its domestic borrowing to long-term debt securities for the financing of fiscal deficit. Out of medium to long term instruments, major borrowing remained floating rate securities while fixed rates instruments were borrowed on average at 3 to 4 percent below the policy rate during caretaker government period.
Resultantly, the average time to maturity of domestic debt has increased to around 3.0 years by the end Jan 2024 as compared to 2.8 years at the end
of June 2023.
This is in- line with the targets mentioned in the Medium-Term Debt Management Strategy (MTDS) FY23-FY26 and a step in the right direction to meet the end June 2024 target of 3.1 years.