SBP pumps over Rs218 billion into banking system

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Central bank on Friday injected Rs218.100 billion into the currency market where much of the liquidity is being gulped by the cash-strapped government to cater its massive and ever-increasing budgetary borrowings. During first half of the current fiscal year, July-Dec FY12, the resource constrained federal and provincial governments borrowed over Rs818.91 billion from central and commercial banks against Rs285.951 billion they had raised during the corresponding period last year. Of the total borrowed amount, government borrowed a huge sum of Rs668.137 billion from the scheduled banks, while Rs150.773 billion were taken from State Bank. This massive government borrowing spree renders the money market without liquidity, a problem that is taken care of by the regulators in central bank through money injections.Friday saw the State Bank conducting its reverse repo operation in the Market Treasury Bills and Pakistan Investment Bonds to pump over Rs218 billion into the system at an annual rate of return of 11.58 per cent.