KARACHI, Dec 24. The State Bank of Pakistan (SBP) on Saturday finally picked up the left-over liquidity from the market, following the tight monetary policy it has been pursuing for more than six months.
The SBP conducted Open Market Operation (OMO) and raised Rs14 billion out of Rs19.3 billion offered by the banks. The surplus liquidity had hit the market rates sending these to the lowest level.
The presence of higher liquidity in the market is one of the main reasons for inflation and experts were firm on Friday that the SBP would conduct OMO for siphoning off the excess liquidity.
However, the SBP raised the money for a short period of time and at a lower rate. The outflow is just for four days at a rate of 7.64 per cent.
Money dealers said that the SBP might continue to generate the liquidity pressure through the short term OMOs and finally gather a huge liquidity at the time of next T-bills auction.
The SBP mopped up Rs68 billion on Thursday through the T-bills auction and the amount was much higher than the target of Rs45bn. The Bank adopted the strategy to allow maturity of short term OMOs at the time of T-bills auction and succeeded in receiving offers worth Rs89bn.
Analysts said that the SBP would again adopt the same strategy as it is bound to off-load the burden of the unsold stocks of T-bills.
Dealers said that the rates might plunge again on Monday as the market was still liquid despite an outflow of Rs14 billion. However, others maintain that the liquidity was not more than Rs20 billion and a substantial amount has gone out of the market to keep the rates stable.
