April 6, 2006	Thursday	Rabi-ul-Awwal 7, 1427

KARACHI, April 5: The State Bank on Wednesday injected Rs16.150 billion in the money market, but the prevailing shortage of liquid cash persisted with the high overnight rates. Banks had been facing acute shortage of liquidity for the last two weeks which kept the money rates at the highest level. The injection failed to ease the situation as market needed more cash to meet the rising demand.

The SBP pumped the liquidity at 8.37 per cent reflecting the trend of overnight rates which remained at 8.9 per cent. The persisted shortage compelled the banks to borrow Rs34.5 billion from the discount window, which showed that the SBP itself wanted to keep the market tight.

“The SBP will have to pump more money in the coming days as the market needs much bigger injection of liquidity,” money dealers said.

They said that the Friday being settlement day would require much more cash and the problem could be resolved either by massive liquidity injection or discounting.

“The situation turned into deep scarcity of liquidity when the SBP sucked up over Rs37 billion last week through sale of treasury bills resulting in to the highest overnight rates,” said an analyst.