The State Bank of Pakistan (SBP) on Friday injected a cumulative Rs3.21 trillion into the financial system through its latest Open Market Operation (OMO), aimed at addressing liquidity shortages across conventional and Islamic banking channels. The operation included both reverse repo transactions and Shariah-compliant Modarabah-based mechanisms, underscoring the central bank’s dual commitment to conventional and Islamic finance sectors.
According to details, the bulk of the liquidity—Rs3.03 trillion—was provided through a reverse repo-based OMO. This comprised two major tranches: a seven-day injection worth Rs63.95 billion at a rate of 11.01 percent, and a fourteen-day injection of Rs2.97 trillion also accepted at 11.01 percent. Market demand was met almost in full, with accepted bids closely matching the amounts offered, reflecting strong appetite for short-term liquidity support.
In parallel, the SBP executed a Shariah-compliant Modarabah-based OMO, injecting Rs176 billion into the Islamic banking system. This included Rs106 billion through a seven-day tenor at 11.13 percent and Rs70 billion through a fourteen-day tenor at 11.11 percent. Both offers were fully accepted, signaling consistent liquidity needs among Islamic banks and specialized Islamic windows of conventional institutions.
Open Market Operations serve as one of the SBP’s primary tools for managing liquidity in the banking sector. By injecting funds through reverse repo transactions, the central bank provides short-term financing to banks and primary dealers against collateral such as Market Treasury Bills (MTBs) and Pakistan Investment Bonds (PIBs). For Shariah-compliant operations, GOP Ijara Sukuk are accepted as eligible securities, allowing Islamic financial institutions access to liquidity in line with their principles.
The timing of this large-scale injection is significant. Analysts note that liquidity pressures have been building in the market due to ongoing fiscal adjustments, higher government borrowing needs, and seasonal cash demand. By injecting over Rs3 trillion, SBP is not only providing immediate relief to banks but also ensuring the smooth functioning of the interbank market, where stability is crucial for maintaining confidence in the broader economy.
Moreover, the operation highlights the growing parallel role of Islamic finance in Pakistan’s banking system. The acceptance of all Modarabah-based bids demonstrates the sector’s reliance on central bank liquidity facilities, particularly during periods of tightened market conditions.
Market participants suggest that such OMOs are likely to remain a regular feature in the weeks ahead, as the SBP balances liquidity requirements with its monetary policy stance. While the injections ease short-term pressures, the broader challenge remains aligning market liquidity with inflation control and fiscal sustainability targets.
This latest OMO result reinforces the SBP’s proactive role in maintaining stability in Pakistan’s banking ecosystem, ensuring both conventional and Islamic institutions have the funds required to meet obligations, sustain lending, and support economic activity.
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