The State Bank of Pakistan (SBP) carried out a substantial liquidity injection through its latest Open Market Operations (OMO), aiming to support the banking sector’s short-term funding requirements and maintain smooth market functioning. The central bank injected a cumulative Rs12.37 trillion into the system on June 28, through both conventional reverse repo arrangements and Shariah-compliant Modarabah-based operations.
According to the detailed auction results released by the SBP, a total of Rs12.2 trillion was injected via the conventional reverse repo OMO facility. The operation was conducted at rates ranging from 11.20 percent to 11.04 percent, with a weighted accepted rate of approximately 11.07 percent for a tenor of seven days. The sizeable participation underscores continued demand from banks to secure funding against eligible collateral amid prevailing liquidity dynamics.
In parallel, the SBP also utilized Islamic liquidity instruments to cater to the specific needs of the Islamic banking segment. Under the Shariah-compliant Modarabah-based OMO, the central bank accepted Rs178 billion out of Rs326 billion offered by participants. This transaction, also structured for a seven-day tenor, cleared at rates between 11.14 percent and 11.13 percent, with the accepted rate settling at 11.13 percent.
The use of both conventional and Shariah-compliant OMOs highlights SBP’s dual approach to managing liquidity in Pakistan’s diverse banking ecosystem. Through these instruments, the central bank not only ensures that conventional banks have adequate short-term funding but also provides Islamic banks and their dedicated Islamic windows tailored avenues for liquidity support, using structures aligned with Shariah principles.
OMOs are a key monetary policy tool employed by the SBP to either inject funds into or absorb surplus liquidity from the banking system, depending on the needs of the market. In injection operations such as these, SBP lends funds to banks and primary dealers against marketable government securities like Market Treasury Bills (MTBs) and Pakistan Investment Bonds (PIBs). For Islamic banking institutions, the instruments typically include GOP Ijara Sukuk structured under modalities like Bai Muajjal or Modarabah, ensuring Shariah compliance.
These operations come against a backdrop where managing market liquidity has become critical to maintaining interest rate stability and supporting broader financial market confidence. By carefully calibrating the volumes and tenors of liquidity injections, the SBP helps avoid undue stress in the interbank market, ensuring that banks can meet daily settlement needs and continue lending to the private sector.
Additionally, with government borrowing needs high and a continuous pipeline of maturities on treasury instruments, such OMOs play a vital role in stabilizing yields and keeping the money market orderly.
Market analysts point out that the scale of these injections also reflects efforts by the central bank to maintain ample liquidity cushions within the system, especially given the prevailing economic conditions and the imperative to balance inflation containment with growth support.
As the SBP continues to deploy a mix of monetary operations, it reinforces its commitment to financial stability across both conventional and Islamic segments of Pakistan’s banking sector, aligning with its broader objectives under monetary policy and liquidity management frameworks.