KARACHI:
The State Bank of Pakistan (SBP) injected Rs575.8 billion into the market through an open market operation (OMO) reverse repo purchase on Thursday.
The SBP conducted the OMO reverse repo purchase (injection) for an eight-day tenor and accepted Rs575.8 billion offered through three bids to address short-term liquidity needs. The OMO received bids at rates ranging from 13.07% to 13.10%, with the SBP accepting the entire amount at a return of 13.07%.
“This move reflects the central bank’s routine measures to ensure liquidity in the inter-bank market,” said Optimus Capital Management Research Head Maaz Azam.
A review of banking credit to the private sector reveals a significant surge in borrowing towards the latter part of 2024 as pressure from the government mounted.
Weekly credit to the private sector, which hovered around Rs8,500 billion for much of the year, recorded a steady increase starting October. By December 22, it reached a record high of approximately Rs10,500 billion.
This sharp rise indicates heightened pressure from the government on private banks to extend credit to the private sector to stir growth. The banking sector’s advance-to-deposit ratio (ADR), a measure to gauge lending to the private sector, improved to 49.7% as of December 6, 2024, up from 47.8% in the previous month.
The ratio had previously bottomed out at 38.4% in August 2024. Since then, the ADR has increased by 11.4 percentage points to its current level of 49.7%, according to AHL Director Equities Tahir Abbas.
Over the period from August 2024 to December 6, 2024, deposits have decreased by 1.6%, while advances have increased by 27.6%.
Additionally, the recent record of yields on short-term bonds shows a slight decline in the three-year yield, from 12.50% on December 24 to 12.49% on December 26.
This indicates that banks are lending to organisations investing in government bonds so the money is not channelling to the private sector but is rather going back to the government, said Maaz Azam of Optimus Capital.
The SBP’s outstanding injections have fluctuated throughout the year, peaking near Rs13 trillion in August before stabilising around Rs11 trillion by December, consistent with its recent liquidity management efforts.
These developments underscore the SBP’s active role in balancing market liquidity and interest rates to support economic activity, said market observers, suggesting the sharp rise in private sector credit highlights increased business confidence, but it also calls for close monitoring to ensure sustainable credit growth amid a challenging economic environment.
Meanwhile, the total liquid foreign currency reserves of Pakistan touched $16,371.5 million as of December 20, 2024. The reserves were composed of holdings by the State Bank and net reserves maintained by commercial banks.
The State Bank’s reserves stood at $11,853.5 million while commercial banks held net foreign reserves of $4,518 million, according to the SBP.
During the week ended December 20, the SBP’s reserves fell by $228 million, primarily due to the government’s external debt repayments.
Moreover, the Pakistani rupee showed slight improvement against the US dollar, appreciating by 0.04% in the inter-bank market on Thursday. By the end of the trading session, the rupee closed at 278.37, gaining 10 paisa against the greenback.
Earlier, the currency had settled at 278.47 on Tuesday, as reported by the SBP. The currency market remained closed on Wednesday due to a public holiday.
Globally, the US dollar hovered near a two-year high of 108.15 against a basket of currencies and was on track to record a monthly increase of over 2%.
On the other hand, gold prices in Pakistan rose on Thursday, mirroring an increase in international rates. In the local market, the price of gold per tola reached Rs274,000, marking a single-day increase of Rs1,400, according to figures provided by the All Pakistan Gems and Jewellers Sarafa Association (APGJSA).
The bullion market had remained closed on Wednesday due to a public holiday. On Tuesday, however, the price of gold per tola had dropped by Rs800.
Globally, gold prices also increased on Thursday. According to APGJSA, the international rate stood at $2,628 per ounce, including a $20 premium, after gaining $14 during the day.
