Missing PostgreSQL libraries while compiling inside Cygwin

I'm trying to compile osm2pgsql inside Cygwin on a Windows7 machine.

While running configure script I'm getting following error message:

checking for PostgreSQL libraries... ./configure: line 17889: /cygdrive/c/Program: No such file or directory
./configure: line 17890: /cygdrive/c/Program: No such file or directory
./configure: line 17891: /cygdrive/c/Program: No such file or directory
./configure: line 17894: /cygdrive/c/Program: No such file or directory
./configure: line 17900: /cygdrive/c/Program: No such file or directory
configure: error: postgresql client library not found

Solution should be adding library folder location to PATH system variable, or have copy of libraries in location of PostgreSQL executables.

Location of PostgreSQL executables is

C:\Program Files (x86)\PostgreSQL\9.1\bin

and libraries location is

c:\Program Files (x86)\PostgreSQL\9.1\lib

both of them are included in PATH system variable (Windows7), but libraries are claimed missing anyway.

Copying libraries into ...\bin directory did not help either.

How should I proceed?