Karachi: The government’s inability to make maturity payments against TFC’s issued 3-years earlier to resolve the circular debt has led them to issue Pakistan Investment Bonds (PIBs) and Market Treasury Bills (T-bills) of worth PKR 391bn.
According to Alfalah Securities Limited, the government has been facing difficulties in making maturity payments of TFCs to five big banks while the ongoing circular debt is yet to be resolved. Out of the total issued TFC amount Habib Bank Limited (HBL) owns PKR 79bn, National Bank of Pakistan (NBP) owns PkR66 bn, Allied Bank Limited (ABL) PKR 44 billion, United Bank Limited (UBL) PKR 42 billion and Muslim Commercial Bank (MCB) PKR 37bn. The issuance of 1-year T-bills and 5-years PIBs would amount to PKR 218bn and PKR 198.4bn respectively, which would lead the banks to improve their liquidity position while also allowing them to enhance their exposure in the power and oil sector. State Bank of Pakistan on the other hand, has cancelled the eligibility of TFCs to be included for Statutory Liquidity Requirements (SLR) while it has also enhanced the limits of PIBs in SLR from 10% to 15% of Time and Demand Liabilities. Hence, Alfalah Securities expects the SBP’s decision would let the banks to continue lending to the government at the expense of private sector’s credit and would result in a crowding out effect.