Govt initiates debt re-profiling for long-term loans on low interest rate

The government has begun re-profiling the domestic debts by repaying expensive short-term loans to local banks and plans to make a long-term debt deal with banks at low interest rates.

The plan aims to increase the availability of funds with the government. Moreover, if the banks fail to increase the advance-to-deposit ratio (ADR) to 50 percent by the end of December 2024 from the 38 percent current, they would pay a 19 percent additional tax.

The government's condition to pay additional tax in failing to reach the targeted ADR led the banks to offer new loans to private businesses at KIBOR (Karachi Inter Bank Offered Rate) minus 6% in recent days.

However, the State Bank data showed that the government has repaid Rs351 billion to commercial banks by purchasing treasury bills.

On the other hand, the government has announced a plan to bring a new loan of Rs10.10 trillion over the next three months (October to December). 

The new debt will be returned by selling long-term investment bonds, while the government also announced the T-bills with maturity rates of 3 to 12 months. 

“The government has begun re-profiling the domestic debt after the availability of funds increased,” said Sana Tawkif, adding the effort aims to get rid of the long-term expensive loans.

She added that the repayment of the loans by the government would increase the liquidity of banks, and pave the way for the government to take loans at low cost.