July 19, 2006	Wednesday	Jumadi-ul-Sani 22, 1427

KARACHI, July 18: The prevailing liquidity shortage compelled banks to borrow from the discount window of the State Bank on Tuesday.

The SBP kept the liquidity position tight in the market and witnessed a high overnight rate just below the discount rate of 9pc per annum.

The banks approached the discount window to borrow Rs9.565bn at but the rates remained at the highest point. Dealers said that the tight liquidity position would be eased on Thursday as an inflow of Rs76bn would join the market.

The SBP on Monday announced to sell treasury bills worth Rs30bn on Wednesday and some analysts said it was a big target. However, in the wake of huge inflows the target looks small while offers could be much more than the target.

The dealers said that the overnight rate was 8.9pc. The banks borrowed Rs13.554bn through discount window on Monday to meet their immediate liquidity needs.

Analysts and dealers believed that the liquidity crunch may continue during the current fiscal. The new monetary policy would not bring any significant change in liquidity position.