The central bank on Friday pumped a huge sum of Rs338.700 billion into the money market to cater to the liquidity needs of the banks which had lent over Rs293.87 billion to the cash-strapped government just a couple of days back on November 2. The State Bank of Pakistan (SBP) Friday conducted its 7-days reverse repo operation and injected Rs338.700 billion into the banking system at 11.52 per cent annual rate of return. The offered amount was worth Rs359.550 billion but the State Bank accepted Rs338.700 billion.
Excessive budgetary borrowings by the cash-strapped federal and provincial governments are believed to have created a severe liquidity crunch in the money market. The rupee shortfall in the banking system is believed to have been so compelling that the SBP has been injecting liquidity into the money market during the whole quarter of the current financial year. The SBP record shows that during July 17-October 28, the central bank pumped a huge sum of over Rs3.204 trillion into the rupee-starved banking system through conducting some 25 reverse repo operations. It was on June 13, when the regulator had conducted the last mop-up operation to wipe out the excess Rs34.500 billion liquidity from the market.
