SBP gives Rs 445b to cash-strapped banks to borrow back Rs43b

Having injected around Rs 445 billion into the banking system Friday, the central bank has announced to borrow for the Ministry of Finance Rs 43 billion more from the banks on March 26.
The State Bank, through conducting reverse repo open market operation, pumped Rs 444.700 billion into the money market.
The bank bought the Market Treasury Bills and Pakistan Investment Bonds from the scheduled banks who offered 34 bids worth Rs 485.700 billion but the regulator, or may be the bureaucrats in the Ministry of Finance, accepted 29 bids of Rs 444.700 billion.
The amount injected is at 8.98 percent per year.
According to an SBP spokesman, the regulator conducts reverse repo OMOs when there is a liquidity crunch in the money market. If this view is to be believed the banks are short of cash.
But, an SBP circular issued on the same day, Friday, says the Ministry of Finance, through the central bank, would be borrowing Rs 43 billion from the apparently cash-strapped banks on March 26.
Of course to cater its budgetary need, the borrowed money would be raised through auctioning the Ijara Sukuk of three-year maturity.
“Another GoP Ijara Sukuk will be issued as per the structure and assets described,” said the SBP circular issued Friday.
One may wonder the banks which are so funds-starved today, on March 22, would be able to be in a position to lend billions to the resources-constrained government. This, however, has to be seen on March 26 by observing the banks’ bid offers against the set target of Rs 43 billion.
Such discrepancies give birth to suspicions as there are some quarters believing that the government had created a sort of debt circle under which it borrows from the risk-averse scheduled banks huge sums that the SBP injects into the system in the name of liquidity crunch.