Pakistani Banks Borrow from Central Bank in Tight Market
February 16 2008
Source: The Economic Times
KARACHI: Pakistan's short-term money rates rose on Thursday as the central bank mopped up 12.50 billion rupees from the market, dealers said. Pakistan's central bank sold 12.50 billion rupees of Treasury bills under five-day repo contracts at 8.95 percent on Thursday to mop up funds .
This caused a shortage of funds and forced a number of banks to borrow cash from the central bank's discount window to meet their requirements. Banks borrowed 14.775 billion rupees from the State Bank of Pakistan. Overnight call rates ended at 9.9 percent, compared with 9.5 percent a day earlier and just below the discount rate of 10 percent.
"There was an inflow of 55.35 billion rupees against an outflow of 35 billion rupees from settlement of T-bills (Treasury bills), and against that the State Bank conducted an OMO and picked up 12.50 billion rupees," said a brokerage house dealer. State Bank of Pakistan sold 4.782 billion rupees ($78.55 million) worth of six-month bills, and 27.45 billion rupees ($451 million) of 12-month paper on Wednesday.
It received total bids worth 50.52 billion rupees against a combined pre-auction target of 35 billion rupees. Settlement of the auction took place on Thursday. Financial markets in Pakistan will be closed on Friday for a public holiday and resume trade on Monday.
In the currency market, the Pakistani rupee ended weaker at 60.91/93 to the dollar, compared from its previous close of 60.88/90. Dealers said the rupee was expected to trade around current levels in the near-term as inflows of foreign investment and higher remittances from Pakistanis abroad were likely to prevent a sharp decline.