In a major move to ensure smooth liquidity flow within the financial system, the State Bank of Pakistan (SBP) on Thursday conducted a large-scale Open Market Operation (OMO), injecting a combined amount of Rs11.4 trillion into the banking market. This included both conventional and Islamic liquidity support mechanisms aimed at easing temporary funding pressures on financial institutions.
According to official data released by the central bank, a total of Rs11.3 trillion was injected through the conventional reverse repo operation. This is one of the largest single-day liquidity infusions by SBP in recent history, signaling the central bank’s proactive stance to maintain monetary stability amid evolving market conditions.
The conventional OMO results revealed that Rs171.1 billion was accepted for a 7-day tenor at an accepted rate of 11.09%. Meanwhile, a much larger sum of Rs11.2 trillion was accepted under the 14-day tenor, with the lowest accepted yield clocking in at 11.03%. These injections were conducted against eligible collateral such as Market Treasury Bills (MTBs) and Pakistan Investment Bonds (PIBs), in line with SBP’s operational framework for liquidity provision.
Simultaneously, SBP executed a Shariah-compliant OMO based on Modarabah principles, injecting an additional Rs115.5 billion into the Islamic banking sector. The 7-day Islamic injection accepted Rs100 billion at a rate of 11.11%, while another Rs15.5 billion was accepted for 14 days at 11.13%. This move reflects the central bank’s ongoing effort to maintain parity and liquidity across both conventional and Islamic financial institutions.
Open Market Operations are one of SBP’s key instruments for conducting monetary policy and managing day-to-day liquidity in the banking system. These operations allow the central bank to either inject or absorb liquidity, depending on systemic needs, by dealing in government-backed securities with eligible market participants.
In this instance, the large-scale injection appears to respond to tightening liquidity conditions in the financial market. By supplying short-term funds against sovereign collateral, the SBP ensures that banks and primary dealers are adequately equipped to meet short-term obligations and maintain financial stability. The move may also be interpreted as part of the broader monetary easing strategy, especially in light of recent interest rate reductions and declining inflation rates observed across fiscal year 2025.
For Shariah-compliant liquidity management, instruments such as Modarabah and Bai-Muajjal have been introduced, using GOP Ijara Sukuk as collateral. These operations ensure that Islamic banks and dedicated Islamic windows of conventional banks have equitable access to central bank liquidity facilities.
The eligible participants in these OMOs include all primary dealers and commercial banks licensed by SBP, with specialized participation from Islamic banks in the Shariah-based operations. The dual-structure injection ensures the central bank’s coverage across Pakistan’s diverse banking ecosystem, reinforcing SBP’s role in stabilizing short-term money markets without compromising on Islamic finance principles.
As Pakistan continues to navigate complex macroeconomic adjustments, such strategic liquidity operations by SBP reflect a careful balance between market facilitation and monetary discipline. This Rs11.4 trillion injection underlines the importance of responsive central banking in maintaining market confidence and supporting the evolving credit landscape.