The State Bank of Pakistan (SBP) carried out a major liquidity intervention on Friday, injecting a cumulative Rs1.607 trillion into the financial system through a combination of conventional reverse repo and Shariah-compliant Modarabah-based Open Market Operations (OMO). Of the total, Rs1.092 trillion was infused via conventional reverse repo OMO, while the remaining Rs515 billion was directed through Shariah-compliant instruments aimed at supporting Islamic banking windows and institutions.
In the conventional OMO, the SBP conducted injections with tenors of seven and fourteen days. For the seven-day reverse repo, the SBP offered Rs162.5 billion, all of which was accepted at rates ranging between 10.55 percent and 10.52 percent, with the accepted rate fixed at 10.52 percent. Similarly, the fourteen-day reverse repo operation saw the central bank inject Rs929.5 billion at the same rate, totaling Rs1.092 trillion across both tenors. These operations provide short-term funding to banks and primary dealers against eligible collateral, primarily Market Treasury Bills (MTBs) and Pakistan Investment Bonds (PIBs), to address temporary liquidity shortages in the market.
Alongside the conventional injection, the SBP executed a Shariah-compliant Modarabah-based OMO to facilitate liquidity management for Islamic banks and specialized Islamic windows of conventional banks. The central bank injected Rs370 billion in a seven-day tenor at rates between 10.56 percent and 10.53 percent, and Rs145 billion in a fourteen-day tenor at 10.53 percent, totaling Rs515 billion. Eligible collateral for these operations includes GOP Ijara Sukuk, which provide Shariah-compliant mechanisms for liquidity support while adhering to Islamic banking principles.
Open Market Operations are a core monetary policy tool used by the SBP to manage short-term liquidity fluctuations. In injection operations, the central bank lends funds to banks or primary dealers against eligible government securities to ease liquidity shortages. Conversely, in mop-up operations, the SBP sells MTBs or other approved instruments to absorb excess liquidity, thereby stabilizing interest rates and maintaining financial market equilibrium. The Bai-Muajjal mechanism, specifically designed for Islamic banking, allows the SBP to perform similar liquidity management without violating Shariah law, ensuring that the Islamic financial sector remains liquid and operationally robust.
Market analysts noted that this significant injection reflects the SBP’s proactive approach to stabilizing Pakistan’s financial system amid ongoing liquidity pressures and evolving macroeconomic conditions. By combining conventional and Shariah-compliant instruments, the central bank ensures inclusive access to funding for all segments of the banking sector, supporting both conventional and Islamic banks in maintaining operational resilience.
The operations also underline the central bank’s commitment to smooth functioning of the financial system, helping to maintain short-term interest rate stability while providing market participants with predictable liquidity flows. With MTBs, PIBs, and GOP Ijara Sukuk serving as collateral, these interventions enhance the credibility and effectiveness of monetary policy transmission, ensuring that banks can continue lending, investing, and supporting economic activity without disruptions.
Through these measures, the SBP continues to balance the dual objectives of financial stability and inclusive liquidity management, positioning Pakistan’s banking sector to navigate short-term funding challenges while sustaining broader economic growth and confidence in the financial markets.
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