The State Bank of Pakistan conducted a large-scale liquidity injection into the financial system on Friday, deploying a cumulative Rs1.6 trillion through conventional reverse repo and Shariah-compliant Modarabah-based open market operations. The move reflects the central bank’s ongoing liquidity management strategy aimed at maintaining stability in short-term money markets and ensuring smooth interbank funding conditions.
Out of the total amount injected, Rs1.393 trillion was provided through conventional reverse repo open market operations. The largest portion of this liquidity support came through the 14-day tenor, where Rs1.5055 trillion was offered by market participants and Rs1.3 trillion was accepted by the central bank. The accepted rate for the 14-day reverse repo stood at 10.51 percent, within a quoted range of 10.54 to 10.51 percent. Seven bids were offered and all seven were accepted for this tenor.
In the shorter seven-day tenor, Rs93.1 billion was both offered and accepted at a rate of 10.53 percent, within a high-low range of 10.54 to 10.53 percent. Four quotes were submitted and all were accepted. In total, the conventional reverse repo OMO saw Rs1.5986 trillion offered by participants, of which Rs1.3931 trillion was accepted.
Alongside the conventional operations, the central bank also injected Rs210.5 billion through a Shariah-compliant Modarabah-based OMO to facilitate liquidity access for Islamic banking institutions. Under this structure, Rs150 billion was injected for a seven-day tenor at an accepted rate of 10.54 percent, within a quoted range of 10.55 to 10.54 percent. Three quotes were offered and all were accepted. Additionally, Rs60.5 billion was injected for a 14-day tenor at the same accepted rate of 10.54 percent, with two bids submitted and accepted. The Shariah-compliant segment saw the entire Rs210.5 billion offered amount fully accepted.
Open market operations are a primary liquidity management instrument used by the State Bank of Pakistan to either inject funds into or absorb funds from the banking system, depending on prevailing liquidity conditions. In injection operations, the central bank lends funds to banks and primary dealers against eligible collateral to address liquidity shortages. Marketable government securities, including Market Treasury Bills and Pakistan Investment Bonds, serve as eligible collateral in conventional OMOs.
In mop-up operations, which are conducted when excess liquidity is present, the central bank sells Market Treasury Bills to banks either on a repo or outright basis in exchange for funds, thereby removing surplus liquidity from the system.
For Islamic liquidity management, the central bank utilizes Shariah-compliant tools such as Bai-Muajjal structures, where Government of Pakistan Ijara Sukuk serve as eligible securities. Islamic banks and dedicated Islamic windows of conventional banks participate in these transactions alongside eligible primary dealers.
The scale of Friday’s liquidity injection signals continued reliance on short-term funding windows to support market stability. As digital trading platforms and real-time settlement systems continue to evolve within Pakistan’s banking ecosystem, central bank liquidity operations remain a critical backstop for maintaining orderly market conditions and managing benchmark rates in line with monetary policy objectives.
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