KARACHI, Dec 26: The State Bank has started assessing year-end outflows from the banking system which the bankers say can reach Rs30 billion this time.
SBP sources say that the central bank is gathering information about expected outflows to see if it needs to inject funds or mop up surplus liquidity. They say that information collected from major banks indicates that Rs28-30 billion should flow out of the system by end-December.
The outflows include around Rs7 billion subscription money of 2.5 per cent shares of Oil & Gas Development Corporation. This amount is currently lying at the National Bank and will be transferred to the Privatization Commission account any time this month.
Further outflows will be in the shape of transfer of profits and dividends earned by the government on its shares in public sector companies including OGDCL and Pakistan Telecommunication Company. Besides, banks would transfer into government accounts the amount of taxes collected at the year-end. “All this combined may result in outflow of Rs30 billion from the banking system,” said a bank treasurer.
INFLOW: Against this the banking system received an inflow of Rs22.6 billion on Friday through maturity of treasury bills sold earlier by the State Bank.
Bankers say this was the last major inflow and that there is no more significant inflows in sight. Due to this inflow banks had some liquidity at hand at the day-end after meeting their daily requirements on Friday. That was why overnight call rate fell from 4 to 2 per cent.
“But it is unclear if the market will remain liquid till the year-end. It will depend on how much money flows out of the system,” said another bank treasurer. “In any case banks may not see a liquidity crunch if the SBP injects some money—or at least it does not go for mopping up.”
SBP NDA: But sources close to the central bank say the SBP may have to drain out some liquidity from the banking system to keep its Net Domestic Assets or NDA in line with the year-end target.
The SBP NDA target is one of the several monetary targets it has to meet at the year-end to satisfy the IMF. The IMF is due to review in February-March 2004 Pakistan’s economic performance in six months to December 2003.
It will be during that review that SBP NDA target will come under discussion. The SBP NDA that stood at Rs187.2 billion at end-June 2003 was projected to expand to Rs205.7 billion at end- December 2003.
The SBP assessment of the year-end outflows from the banking system would help it plan on how to drain out some liquidity — if needed to meet its NDA target — without pushing up interest rates.
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