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KARACHI, Oct 8: The State Bank has reassured the banks that it would arrange foreign exchange for external payments if they run short of it so there is no need for them to get panicky. The SBP has also signalled to the market by injecting Rs12.5 billion that it would also keep the banks liquid enough to meet their day to day requirements.
Treasurers of major local and foreign banks got this assurance from a senior official of Exchange & Debt Management Department, as an air of uncertainty gripped banks when they opened on Monday after the US attacks on Afghanistan last night.
The US dollar closed at Rs62.80/Rs62.85 up only five paisa over the weekend close in the inter-bank market.
Bankers said the market saw at least $15 million demand from the customers including a $6 million import letter of credit opened by a multinational company but they said that the market saw least activity. “Market activity remained dull also because the New York financial market was closed on a national holiday,” said treasurer of a foreign bank.
But he said that the banks transacted all deals in tomorrow- value meaning that the deals will materialize on Tuesday. So it will be wrong to presume that the exchange rate remained stable only due to closure of New York: The SBP assurance also worked.
However, the dollar gained 30 paisa in the open market where it closed at Rs63.90/Rs64.20 for spot buying and selling. Money changers said the dollar shot up as flights from Dubai remained suspended for sometime in the wake of the US attacks on Kabul.
MONEY MARKET: The SBP on Monday injected Rs12.5 billion into a cash-strapped market for one week by purchasing treasury bills at 9.5 per cent.
Senior bankers said despite the injection the market remained a bit short of liquidity with overnight call rate still hovering around 9-10 per cent. Some of them said since the SBP has been making weekly injections it seems it is uncertain about the exact reasons for the present liquidity crunch. One central banker who refused to be named confirmed it.
“We do not know for sure why the market is facing a liquidity crunch,” he said but hastened to add “one basic reason is that it is time for cotton financing now.”
The private sector credit picks up in October every year and continues through March because agricultural productivity is at its peak during this period. But this time around the liquidity crunch seems severer than in the past. “Maybe people are taking out money from banks and holding cash. But it would take us two more weeks to know whether it is so.”
“But the banks should be rest assured that we would continue to keep the market reasonably liquid regardless of why there is a liquidity crisis. This is what we are signalling to banks through weekly injections.”
