The State Bank of Pakistan (SBP) executed a large-scale liquidity operation today, injecting a total of Rs12.68 trillion into the banking system through a mix of conventional and Shariah-compliant Open Market Operations (OMOs). The move aims to address short-term liquidity requirements and stabilize interbank money market conditions.
The bulk of the liquidity support, amounting to Rs12.4 trillion, was channeled through conventional reverse repo operations. This included Rs195.2 billion for a 7-day tenor at an accepted rate of 11.04 percent, and Rs12.26 trillion for a 14-day tenor at an accepted rate of 11.01 percent. All offered bids for these operations were fully accepted, underscoring the scale of liquidity needs in the market.
In parallel, the SBP injected Rs228 billion via Shariah-compliant Modarabah-based OMOs, catering specifically to Islamic banking institutions and windows of conventional banks offering Islamic products. This consisted of Rs170 billion for a 7-day tenor at an accepted rate of 11.13 percent, and Rs58 billion for a 14-day tenor at the same rate. Similar to the conventional operation, all offered bids were accepted in full.
OMOs are a primary monetary policy tool used by the SBP to manage liquidity levels in the banking system. In injection operations, the central bank provides funds to banks and primary dealers against eligible collateral, such as Market Treasury Bills (MTBs) and Pakistan Investment Bonds (PIBs) for conventional transactions, and Government of Pakistan Ijara Sukuk for Islamic transactions under Bai-Muajjal arrangements.
By deploying these operations, the SBP ensures that banks maintain sufficient liquidity to meet their payment obligations and facilitate smooth functioning of the financial system. The reverse repo mechanism allows banks to borrow funds from the SBP by pledging eligible government securities, while in mop-up operations, the SBP withdraws excess liquidity by selling securities to banks.
The decision to conduct large-scale liquidity injections comes against the backdrop of ongoing challenges in Pakistan’s financial markets, where tight liquidity conditions can impact lending, investment flows, and broader economic stability. Analysts note that such substantial injections indicate heightened short-term funding needs among financial institutions, potentially linked to seasonal payment cycles, fiscal settlements, or shifts in deposit flows.
In the Islamic banking segment, the use of Shariah-compliant Modarabah-based operations is critical for ensuring liquidity management in line with religious principles. By offering parallel operations for both conventional and Islamic banking sectors, the SBP supports a more inclusive monetary policy framework that caters to the diverse nature of Pakistan’s banking landscape.
The SBP’s actions in the coming weeks will be closely monitored by market participants to gauge the central bank’s stance on liquidity management, particularly as interest rate expectations, government borrowing requirements, and macroeconomic indicators evolve. For now, the record-scale injections underscore the central bank’s readiness to maintain stability in the country’s financial system.