Qudsia Bano 

The government has raised Rs427 billion through the latest auction of Pakistan Investment Bonds (PIBs), exceeding the initial target of Rs350 billion. This move signals a clear shift in its borrowing strategy, focusing more on long-term debt rather than short-term treasury bills.

The banks offered a total of Rs887 billion in bids, showing that they are currently holding large amounts of excess liquidity. The government's decision to accept Rs427 billion reflects its growing need for funds, but also its preference to secure financing for longer periods. The biggest portion of the raised amount – Rs287.6 billion – came from 10-year bonds. While the highest number of bids was for 5-year bonds, the government chose to accept more in the 10-year category.

This highlights a strategy aimed at spreading out repayments over a longer horizon and reducing short-term refinancing pressure. Talking to WealthPK, Shahid Javed, a senior economist at the State Bank of Pakistan (SBP), said the move shows that the government is responding to falling inflation expectations and hoping to lock in lower interest rates for the long run.

He said the market’s strong response shows that the banks are confident that the interest rate environment will remain stable or improve. In addition, a report by the State Bank of Pakistan reveals that long-term borrowing through PIBs has increased significantly. Between June 2024 and February 2025, the total volume of PIBs jumped from Rs28 trillion to Rs32.5 trillion, an increase of Rs4.5 trillion within eight months.

The breakdown of the latest PIB auction shows Rs37 billion raised for 2-year bonds, Rs38 billion for 3-year, Rs93.2 billion for 5-year, and Rs247.6 billion for 10-year bonds. This clear tilt towards longer tenors also reflects growing confidence in economic stability. Talking to WealthPK, Asim Mustafa, Regional Head at Faysal Bank Limited, said the government is likely trying to take advantage of the recent 1,000-basis-point cut in the policy rate.

He said expectations of further rate cuts could lead to lower borrowing costs, and locking in funds now could prove to be a cost-saving strategy in the long term. As inflation continues to decline and interest rates fall, the government’s long-term debt approach may help manage fiscal pressures more effectively. The real test will be how well this strategy holds up in a challenging economic environment.

Credit: INP-WealthPk