Karachi February 22 2023: On February 22 2023, SBP raised PKR 257.7 billion through the auction of market treasury bills at all time high rates and 295 basis points above the policy rate of 17 percent, according to State Bank of Pakistan.
According to industry experts the result of today auction suggest big increase in interest rate, at least by 200 basis points as 3M and 6M papers usually maintain a spread of 80 to 100 basis points from policy rate.
The government received total bids worth PKR 346 billion and the highest bids of PKR 246 billion for 3 Month T-bills followed by PKR 50 billion for 6 Months and PKR 50 billion for 12 Months.
The cut-off yield for 3 Months, 6 Months, and 12 Months paper settled at 19.95 percent, 19.9000 percent, and 19.7900 percent, respectively. Cut-off yields increased by 195, 206, and 184 basis points for 3 Month, 6 Month, and 12 Month T-Bills, respectively.
On January 23 2023, the Monetary Policy Committee (MPC) decided to increase the policy rate by 100 basis points to 17 percent citing inflationary pressures are persisting and continue to be broad-based. If these remain unchecked, they could feed into higher inflation expectations over a longer than-anticipated period. The MPC stressed that it is critical to anchor inflation expectations and achieve the objective of price stability to support sustainable growth in the future. However, inflation escalated to 27.6 percent for January 2023 when compared with 24.5 percent in December 2022.
The International Monetary Fund (IMF) has demanded an upfront big increase in interest rate, which can push the key rate to a new high of 20 percent, aimed at giving a strong signal of economic stabilisation policies and curbing higher inflationary expectations, claimed by Express Tribune a week ago.
The government raised amount of PKR 233 billion in 3 Month T-bills followed by PKR 13.8 billion in 6 Months and PKR 10.7 billion in 12 Months papers.
Despite offering unprecedented high rates the government failed to raise the targeted amount, raising PKR 257.7 billion in the latest auction against a target of PKR 300 billion.
