In a significant move to address liquidity needs in the banking system, the State Bank of Pakistan (SBP) conducted a major Open Market Operation (OMO) on Thursday, July 17, 2025. Through a combination of conventional and Islamic liquidity instruments, the central bank cumulatively injected Rs902.52 billion into the interbank market.
The OMO consisted of two parallel mechanisms: a conventional reverse repo injection and a Shariah-compliant Modarabah-based transaction. The lion’s share of liquidity—Rs865.12 billion—was injected through the conventional reverse repo operation with a tenor of 8 days. The accepted rate for these funds stood at 11.08%, with bids received in a range of 11.12% to 11.04%. A total of 13 quotes were submitted by participating institutions, out of which 11 were accepted.
Alongside the conventional mode, the SBP also conducted an Islamic liquidity operation using Modarabah-based injection tools, reflecting its ongoing commitment to supporting Islamic banking windows in parallel with the conventional system. Through this Shariah-compliant OMO, the SBP injected an additional Rs37.39 billion into the market, also for an 8-day tenor. The accepted rate was finalized at 11.13%, slightly above the conventional reverse repo rate, with quotes ranging from 11.15% to 11.13%. All three quotes submitted in this category were accepted.
This dual-mode OMO reflects the SBP’s proactive stance in ensuring liquidity support across both conventional and Islamic banking segments. It also signals the central bank’s effort to maintain short-term stability in money markets at a time when demand for liquidity is surging across sectors.
Open Market Operations are among the SBP’s primary monetary tools used to either inject liquidity or mop up excess funds from the banking system. In the case of an injection, the SBP lends money to banks and Primary Dealers (PDs) against eligible securities such as Market Treasury Bills (MTBs) and Pakistan Investment Bonds (PIBs). These transactions are generally short-tenor in nature and help address immediate liquidity pressures.
For the Islamic side of banking, the SBP employs instruments such as Modarabah and Bai-Muajjal, using GOP Ijara Sukuk as underlying securities, thereby aligning liquidity management with Shariah principles. Islamic banks and Islamic windows of conventional banks are eligible participants for these operations.
The scale of today’s injection indicates a tightening of market liquidity conditions, possibly due to higher demand from both public and private sectors amid upcoming fiscal adjustments and rising market participation in government securities.
Such interventions also provide insight into SBP’s broader monetary management strategy, particularly in a period marked by careful calibration of inflation control, interest rate management, and systemic liquidity. As economic activity continues to pick up pace post-fiscal year transitions, the central bank appears committed to ensuring that liquidity shortfalls do not hamper financial market operations or broader macroeconomic goals.