The State Bank of Pakistan (SBP) on Friday injected some Rs90 billion of liquidity into the money market. The injection of liquidity, according to central bank’s chief spokesman Syed Wasimuddin, is carried out when the local currency market where billions of rupees were blocked, thus creating intermittent liquidity crunches.
The analysts attribute the blockade of billions to the banks’ ever-increasing Non-Performing Loans, crossing the Rs500 billion mark during FY11, and excessive budgetary borrowing by the government accumulating at Rs2 trillion during the previous year.The central bank, in its Friday’s reverse repo open market operation in the Government of Pakistan Market Treasury Bills and Pakistan Investment Bonds, injected around Rs90 billion into the banking system.
According to SBP, the offers from primary dealers for Saturday’s auction were huge; amounting to Rs157.350 billion for the 7-days reverse repo. But, the central bank accepted bids worth Rs90 billion at 13.45 per cent rate of return. “Total amount offered at 13.45 per cent was Rs25,400 million, out of which SBP accepted Rs11,450 million on pro-rata basis,” the central bank said. The liquidity crunch, analysts believe, was mainly because of the fact that no fresh liquidity through public savings and other means was coming to the rupee market with the money in circulation already blocked in the face of banks’ bad debts and government borrowings.
