The State Bank of Pakistan (SBP) carried out a substantial liquidity injection on Friday through its latest Open Market Operation (OMO), infusing a cumulative Rs14.304 trillion into the money market. The injection included both conventional reverse repo and Shariah-compliant Modarabah-based operations, aiming to address ongoing liquidity stress in the banking system.
According to data released by the SBP, the central bank injected Rs13.929 trillion through a conventional reverse repo transaction with a seven-day tenor. The accepted bids were settled at a rate of 11.03 percent, on the lower end of the bid range which stretched from 11.15 percent to 11.03 percent. A total of 36 quotes were submitted and accepted in the process.
In parallel, the SBP also executed a Shariah-compliant OMO based on Modarabah principles, injecting an additional Rs375 billion. This segment of the operation also had a seven-day tenor and was conducted at a fixed rate of 11.11 percent, within a narrow bid range of 11.12 percent to 11.11 percent. All three quotes submitted under the Islamic window were accepted in full.
The OMO operations, both conventional and Islamic, indicate the central bank’s proactive approach to maintaining system-wide liquidity amid fluctuating macroeconomic indicators and persistent funding pressures. This massive injection suggests that the banking sector had entered the week with a notable liquidity shortfall, prompting the SBP to deploy this key monetary tool to ensure stability across short-term funding markets.
Open Market Operations are standard liquidity management tools used by the SBP to either inject or absorb liquidity from the financial system, depending on prevailing economic and monetary conditions. In injection mode, the SBP lends money to commercial banks and primary dealers against government-backed securities such as Market Treasury Bills (MTBs) and Pakistan Investment Bonds (PIBs). The same mechanism also applies in Shariah-compliant operations where Government of Pakistan Ijara Sukuks serve as eligible collateral for Islamic institutions.
Through these instruments, the central bank maintains its control over short-term interest rates and ensures efficient transmission of monetary policy. With the policy rate currently held at 11 percent, as per the latest Monetary Policy Committee decision, OMOs help in fine-tuning market liquidity without altering the broader stance of monetary tightening or easing.
Market analysts see today’s injection as a clear signal of the SBP’s continued focus on safeguarding financial system liquidity while simultaneously navigating a complex macroeconomic environment marked by external account pressures and cautious investor sentiment. The intervention also helps commercial banks manage their short-term obligations including reserve requirements, interbank settlements, and funding corporate demand.
As Pakistan’s financial system gradually adapts to evolving liquidity cycles, the SBP’s dual-track strategy — supporting both conventional and Islamic financial markets — reinforces its role as a stabilizer of systemic risk while catering to the country’s diverse banking ecosystem.