Pakistan’s central bank raises PKR 15.8 billion in investment bond auction

The State Bank of Pakistan (SBP) raised PKR 15.8 billion ($56 million) on Wednesday through an auction of fixed-rate Pakistan Investment Bonds (PIBs). Despite a target of PKR 350 billion, the auction attracted bids totaling PKR 476 billion.

The central bank reduced cut-off yields on the five-year bond by 3 basis points to 12.36%, while 10-year yields also dropped 3 basis points to 12.76%. However, bids for all other tenures were rejected.

In its last monetary policy announcement, the SBP maintained the benchmark interest rate at 12%, resulting in a high real interest rate of 10.5%.

This elevated rate has curtailed economic activity, as businesses and households struggle with increased borrowing costs.

With inflation remaining well below the policy rate, analysts question the justification for maintaining such high interest levels, especially given the central bank’s objective of price stability.

The private sector has also felt the impact of tightened financial conditions, with credit growth declining by 8.43% between December 2024 and January 2025. This drop highlights the challenges facing investment and economic expansion in Pakistan.