Last Updated on: 29th June 2023, 12:26 am
Investment in Govt. Papers Set a New Record And Crosses Rs10.3tr : SBP
The State Bank of Pakistan, in its latest report published on Monday, discussed that banks and non-banks including corporate sector investments in the government papers crossed Rs10.3 trillion by the end of August. Most of these investments are carried out in short-term papers.
The investment of the Banks arrived in extraordinary levels at Rs7.94 trillion considering their investment policy to secure optimum profits while investing in risk-free instruments and allow for 77.1 percent of the total investments whereas the rest emerged from non-banks together with insurance organizations, funds, and corporate sector add up to Rs2.361 trillion.
Moreover, the World Bank in its latest report stated that the strong short-term deposit mobilization, because of the current growth in policy rates, is employed for investments in government securities.
The high interest has been the major factor for this direction as the banking sector is pleasant with high-yield short-term risk-free investment. Although, this direction has overfilled out the private sector.
The banks had subsidized Rs5.589tr in the short-term T-bills until August 31. Furthermore, in the auctions that were held after August 31, the continuing tendency to invest in T-bills shows that high-interest rates have supported banks to park their liquidity in government papers.
In the high-interest rate situation, the T-bills have pushed out PIBs as a relatively appealing investment option. The PIBs lost engaging since the returns on the short-term papers have risen to the same levels as the return on PIBs while the banks discovered it hard to mobilize long-term deposits.
Bankers say that while the interest rate has been still not balanced and is directed by the movements in inflation, mobilizing long-term deposits is almost not possible. Banks also invested Rs62.5 billion in Sukuk Islamic bonds while the non-banks’ investment had been at Rs8.5 billion.
They further added that rising short-term domestic debts had remained a major problem for the government to rehabilitate the country’s debt-to-GDP ratio although the debt vulnerabilities would conquer.
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