Government vows to prioritize regular auctions for domestic financing

January 22, 2024 (MLN): To alleviate pressure on Pakistan’s debt sustainability, the government has committed to rely on the regular primary T-bill, PIB and Sukuk auctions as the primary mechanism for raising new domestic financing, according to the first review report published by the International Monetary Fund (IMF).

The government ensured to IMF of proactive debt management efforts to cover the large financing requirements that are putting pressure on our debt sustainability.

Given the large share of floating-rate domestic debt and elevated global interest rates Pakistan’s debt servicing costs are projected to remain high over the near term.

In view of this, there is an increasingly narrow path for fiscal and monetary discipline to ensure debt sustainability.

At the same time, to build the foundation for strong private sector growth over the medium term, the government recognizes the importance of deepening domestic financial markets and moving away from a bank-centric financial system.

To this end, the government will issue and list its securities, including short-term Shariah-compliant instruments, on the Pakistan Stock Exchange which will help diversify and expand the investor base for government debt.

As the country embarks on public sector pension reform and works towards creating an enabling environment for retirement savings for all Pakistanis, the Pakistani government further committed to reform the National Savings Scheme by making it more cost-effective and reducing crowding-out of market-based saving opportunities.

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