State Bank of Pakistan Governor Dr Shamshad Akhtar has said that the government is planning to curtail its expenditures and adhere to a desirable borrowing program for fiscal year 2009, which aims to renew efforts to reduce its reliance on inflationary borrowings from the central bank.
Addressing media at SBP head office she said that fiscal pressures had resulted in cumulative borrowings from the SBP of almost Rs 1.4 trillion as on November 8, 2008, of which Rs 369 billion was taken during July 1 to November 8, 2008.
"These trends in SBP borrowing underscore the need for aligning fiscal management in accordance with the overall resource availability to avoid further crowding out of private sector credit and prevent further stress on core inflation," she said.
Besides rising inflationary pressures, the prevailing trends had posed complications and conflicting demands on monetary management., she added. Dr Akhtar said that at present interest rate levels, the banks have undersubscribed to government securities, and the resulting reduction in banks' T-bill holdings had to be transferred to SBP and strained the functioning of the repo interbank market, necessitating banks' frequent recourse to discount window.
These developments, straining banks' liquidity position, disrupted the trends in overnight call rates that experienced high degree of volatility and increased sharply posing difficulty for business decisions in the economy, she added.
She said that recent liquidity injections through Open Market Operations (OMOs), discount window, and lowering of reserve ratios had, however, helped in moderating these pressures.
Comments
Comments are closed.