The State Bank of Pakistan (SBP) injected a substantial Rs12.3 trillion into the country’s financial system through its latest open market operation (OMO) conducted on Friday. The move highlights the central bank’s active management of liquidity pressures across both conventional and Islamic banking channels.
According to the central bank’s official data, Rs12 trillion were provided through reverse repo operations under the conventional framework, while an additional Rs328 billion were injected through Shariah-compliant Modarabah-based OMOs. The exercise demonstrates the dual-track approach SBP uses to ensure liquidity flows smoothly to both conventional and Islamic financial institutions.
In the conventional segment, the injection was carried out primarily across seven-day and fourteen-day tenors. For the seven-day reverse repo, SBP accepted Rs191 billion at a cut-off rate of 11.06 percent, while for the fourteen-day tenor, it injected Rs11.82 trillion at a cut-off of 11.01 percent. The operation was fully subscribed, with offered and accepted amounts matching across both tenors, reflecting strong demand from market participants.
Parallel to this, the Shariah-compliant Modarabah-based OMO saw injections totaling Rs328.5 billion. Of this, Rs156.5 billion were accepted for a seven-day tenor at a cut-off rate of 11.14 percent, while Rs172 billion were accepted for a fourteen-day tenor at 11.13 percent. These operations underline SBP’s effort to cater to liquidity requirements of Islamic banks and windows operating within the financial system.
Open market operations are a critical monetary policy tool deployed by the State Bank to regulate liquidity within the banking sector. In cases of injection, SBP lends funds to banks or primary dealers against eligible collateral to ease liquidity shortages. The eligible securities for conventional OMOs include Market Treasury Bills (MTBs) and Pakistan Investment Bonds (PIBs), while for Islamic transactions, government-issued Ijara Sukuk are utilized under Shariah-compliant structures such as Bai-Muajjal or Modarabah.
Conversely, when the banking system experiences surplus liquidity, the central bank can mop up excess funds by selling MTBs, either outright or through repo agreements. This flexible mechanism enables SBP to manage short-term money market conditions and ensure monetary policy transmission remains effective.
By conducting large-scale OMOs, SBP aims to maintain stability in interbank markets, anchor short-term interest rates, and support broader macroeconomic objectives. The injection of over Rs12 trillion indicates that the central bank is responding to significant liquidity needs, which could be influenced by upcoming debt settlements, government borrowing requirements, or seasonal fluctuations in market cash flows.
For Islamic banks, the availability of Shariah-compliant liquidity management instruments remains vital for ensuring level playing field with conventional banks. The inclusion of Modarabah-based OMO facilities demonstrates SBP’s continued commitment to developing tools that align with Islamic principles while maintaining overall stability of the financial sector.
Market analysts suggest that the scale of this injection reflects both the magnitude of liquidity requirements and SBP’s proactive approach in ensuring banking operations are adequately funded. Such interventions are expected to ease short-term pressures, though they also underline the broader structural dependence of the financial system on central bank liquidity.
The OMO outcome adds another layer to ongoing discussions about Pakistan’s monetary stance, the balance between tightening and liquidity support, and the central bank’s strategies for managing financial stability in the face of fiscal and external challenges.