The State Bank of Pakistan (SBP) has injected a substantial Rs2.17 trillion into the banking system through a combination of conventional reverse repo and Shariah-compliant Modarabah-based Open Market Operations (OMO), according to official figures released today. This move underscores the central bank’s ongoing efforts to manage liquidity in Pakistan’s financial market and ensure smooth functioning of the banking system.
Out of the total liquidity injection, Rs1.97 trillion was injected through conventional reverse repo OMOs. The operation covered both seven-day and fourteen-day tenors, with the seven-day reverse repo accepting Rs77.6 billion at a rate of 11.02 percent, while the fourteen-day tenor absorbed Rs1.895 trillion at a rate of 11.01 percent. The market response indicates robust participation from banks and primary dealers seeking short-term liquidity support against eligible government securities.
In addition to conventional OMO operations, the SBP injected Rs201 billion through Shariah-compliant Modarabah-based instruments, reflecting the growing integration of Islamic finance mechanisms in monetary operations. The seven-day reverse repo via the Shariah-compliant structure accepted the full offered amount at a rate of 11.05 percent. This initiative allows Islamic banks and specialized windows of conventional banks to access liquidity without engaging in interest-bearing instruments, aligning monetary policy with Shariah principles.
Open Market Operations are a key monetary tool employed by the SBP to manage liquidity fluctuations in the financial system. In the case of injections, the central bank lends funds to banks and primary dealers against eligible collateral, including Market Treasury Bills (MTBs) and Pakistan Investment Bonds (PIBs), to address temporary shortages of liquidity. For Shariah-compliant Bai-Muajjal operations, Government of Pakistan Ijara Sukuk serve as eligible collateral, facilitating liquidity management within the Islamic banking segment.
This dual approach of conventional and Shariah-compliant liquidity injection reflects SBP’s commitment to accommodating diverse banking structures while ensuring that both conventional and Islamic banks have access to short-term funding. The operations are part of the central bank’s broader strategy to stabilize short-term interest rates and maintain market confidence.
Market participants welcomed the operation as a proactive step to ensure sufficient liquidity ahead of month-end funding needs and ongoing macroeconomic adjustments. The combined injection of Rs2.17 trillion is expected to support interbank liquidity, smooth functioning of treasury operations, and stability in money markets.
The SBP also emphasized that OMOs serve not only as liquidity management tools but also as instruments to signal policy stance to the market. By employing both conventional and Shariah-compliant operations, the central bank demonstrates its balanced approach toward promoting financial inclusivity while adhering to sound monetary policy principles.
Overall, today’s OMO results highlight the central bank’s active role in maintaining liquidity equilibrium, supporting banking operations, and fostering stability in Pakistan’s financial ecosystem. The substantial market injection is likely to have immediate effects on short-term interest rates and broader financial conditions, providing banks with the necessary resources to meet liquidity demands efficiently.
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