April 23, 2006	Sunday	Rabi-ul-Awwal 24, 1427

KARACHI, April 22: The State Bank again injected liquidity to saturate the thirst of the market but the demand remained high. The total discounting made during April proved to be the highest in any month during 2005-06.

The SBP injected Rs14 billion on Saturday for relatively a longer period of seven days, while the demand was over Rs30.5 billion. A sum of Rs49 billion were injected by the SBP this weak but most of the time the overnight rates remained at 8.9 per cent.

The SBP, in its second quarterly report, had hinted that the monetary policy could be tightened further in the coming months. It means that the shortage of liquidity would prevail for a longer period.

At the same time the money rates would also remain higher that would lead to increase in the lending rates of banks.

Bankers said that the shortage of liquidity would not hit their profits as the credit growth was satisfactory. The credit to private sector has almost reached close to the previous year’s growth. Last year, listed banks earned 99 per cent growth in profit mostly on account on higher interest-based income.

Rates slipped slightly on Thursday and further on Friday this week after remaining high due to the carry-over effects of three weeks of liquidity shortages and a large pick-up in the T-bill auction held during the previous week, said an analyst.

“Owing to severe liquidity shortages during this month, total discounting during April has been in excess of Rs158 billion, which is higher than any month during 2005 or 2006 (todate),” said Salman Jaffrey, analyst at Jahangir Siddiqui and Company.

In spite of the injection of liquidity, banks still had to resort to the discount window to the tune of Rs3.75 billion on Saturday.

The SBP is expected to announce auction of Treasury bills for settlement on April 27. Inflows from maturing T-bills on April 27 amount to Rs5.45 billion. It is expected that the pre-auction target will remain in line with the maturity amount that is Rs5 to 6 billion.