The State Bank of Pakistan is keeping banks liquid ahead of November 4, auction of the long term Pakistan Investment Bonds to block cartel making by some banks to push up yields.

Another reason for leaving enough liquidity in the banking system is to keep the banks comfortable during the month of Ramazan, when people withdraw money for Eid purchases.

On October 29, the State Bank sold Rs39 billion worth of three month and one year bills, falling short of the sale target of Rs45 billion. The auction of the bills had attracted about Rs54 billion.

The central bank sold Rs10.4 billion worth of three-month bills at a weighted average of around 1.46 per cent, showing almost no change over the October 1 level. The SBP also sold Rs28.6 billion one-year bills at an average of around 1.95 per cent, up two basis points from where it was on September 3.

The central bank will sell at least Rs13 billion worth of long term PIBs on November 4 as the second instalment of a Rs50 billion jumbo issue of the bonds announced last month.

According to the Statement of Affairs of the State Bank of Pakistan, for the week ended October 25, 2003, both notes in circulation and those issued increased further in the week under review. Notes in circulation stood at Rs568,395.352 million against earlier week’s figure of Rs557,156.091 million, showing a rise of Rs11,239.261 million. When compared to the corresponding week a year ago when it was Rs471,740.056 million, the current week’s figure is higher by Rs96,655.296 million.

Total notes issued also recorded a rise in the current week. At Rs568,553.106 million it was larger by Rs11,296.108 million over the figure of Rs557,256.998 million recorded a week earlier. In the corresponding week last year it stood at Rs471,948.092 million, which shows current week’s figure to be higher by Rs96,605.014 million over last year’s figure.

Approved foreign exchange also increased in the week, rising to Rs501,962.476 million, or by Rs21,332.314 million over preceding week’s figure of Rs480,630.162 million. When compared to the corresponding week a year ago, when the figure was Rs345,475.719 million, the current week’s figure was higher by Rs156,486.757 million.

Balances held outside Pakistan in approved foreign exchange showed a decline in the week under review. It stood at Rs86,852.763 million over preceding week’s figure of Rs109,267.411 million, showing a fall of Rs22,414.648 million. Compared to last year’s corresponding figure of Rs51,732.902 million, the current week’s figure is substantially higher by Rs35,119.861 million.

Loans and advances of scheduled banks to the three sectors — agricultural, industrial and export —showed a mixed picture in the week under review. The agricultural sector received Rs54,947.895 million similar to preceding week’s figure. The current week’s figure is larger by Rs1,092.869 million over last year’s corresponding figure of Rs53,855.026 million.

There was an inflow of Rs2,693.269 million to the industrial sector during the week under review, depicting a decline of Rs1.752 million over previous week’s Rs2,695.021 million. When compared to last year’s corresponding figure of Rs3,265.843 million, the current week’s figure is lower by Rs572.574 million.

The export sector received Rs66,383.283 million against previous week’s figure of Rs66,992.022 million, showing a decline of Rs608.739 million. Current week’s figure was larger by Rs17,123.917 million over last year’s corresponding figure of Rs49,259.366 million.

According to the weekly statement of position of scheduled banks for the week ended October 18, 2003, the sum of demand and time liabilities increased in the week under review. The sum total stood at Rs1,831,855 million against preceding week’s Rs1,800,303 million, showing a rise of Rs31,552 million. As compared to the total deposits of Rs1,545,800 million in the corresponding period last year, current week’s deposits were higher by Rs286,055 million.

During the week under review, both demand and time deposits rose. Demand deposits increased to Rs895,769 million, a rise of Rs21,052 million over previous week’s Rs874,717 million. It was also higher against last year’s corresponding figure of Rs669,344 million by Rs226,425 million.