KARACHI: Massive outflows from banks have put them in the same position as they had been during the five years of the previous government.

During the last fiscal year (2012-13) the banks were facing a liquidity gap of Rs600bn and, according to an analyst, the situation could be worse this time if the banks invest more in next auction of treasury bills to be held on Feb 4.

The scheduled banks are raising more liquidity than their capacity, inviting the State Bank to frequently inject liquidity in to system.

However, despite this liquidity shortage faced by the banks, the government raised Rs197bn through Pakistan Investment Bonds on Wednesday that was more than the target of Rs180bn for the entire quarter, Jan-March.

On Friday, the SBP injected Rs175 billion into the banking system to keep banks liquid.

Until last month, the present government had managed to distance itself from the scheduled banks and borrowed mostly from the central bank. However, the government raised Rs1.4 trillion from Nov 27 to Dec 24.

In the last auction held on Jan 22, the SBP raised Rs738bn while the target was Rs450bn.

S.S. Iqbal, a money dealer in the inter-bank market, said that the target for the next T-bill auction is too large compared to the maturity amount on the same day.

The SBP has set Rs300bn for the next auction against the Rs97bn maturity, which means excess Rs203bn will be raised.

“I believe the State Bank will not succeed in raising the targeted amount of Rs300bn in the next auction since the liquidity gap could be a serious crisis,” he said.

Though the government claims to remain in the limit to maintain low fiscal deficit this year, the monetary indicators show the situation is going the other way round.

The huge outflows from the banking system during the last fiscal year indicated the widening of fiscal gap that ended at 8 per cent.

Bankers said the government will continue to rely on private banks as it has already gone far away from the target to borrow from the central bank.