The State Bank of Pakistan (SBP) on Friday injected Rs603 billion worth of liquidity into the banking system through the open market operation, as aggressive government borrowing and weak external account put pressure on the money market, said analysts.This massive amount of liquidity injection also shows cash crunch in the banking system.The analysts said that the government is the major beneficiary of the hefty liquidity injection in the money market.
The state bank is continuously pumping liquidity in the banking system to evade liquidity shortage and reduce the cost of government borrowing,said Ahsan Mehanti, an analyst at Arif Habib Investment.
Pakistan’s exchange rate is under pressure due to huge external debt and high import payments, which is evident from the fact that the rupee has depreciated by 10 percent against the dollar since October 2011.
Along with the recent monetary policy decision, the central bank announced several measures to ensure smooth availability of the rupee liquidity in the money market.
