The State Bank of Pakistan (SBP) conducted an Open Market Operation (OMO) today, injecting a total of Rs266.6 billion into the financial system to address liquidity shortages in the banking market. The operation was carried out through both conventional reverse repo instruments and Shariah-compliant Modarabah-based OMOs, highlighting the central bank’s dual approach to managing liquidity for both conventional and Islamic banking participants.
According to the central bank’s announcement, Rs113.3 billion was injected through conventional reverse repo OMOs. This included Rs55.9 billion for a seven-day tenor at an accepted rate of 11.06 percent, and Rs57.4 billion for a 14-day tenor at 11.01 percent. Both tranches saw full acceptance of offers received, reflecting the banking sector’s strong demand for short-term liquidity.
Meanwhile, Rs153.3 billion was channeled into the system through Shariah-compliant Modarabah-based OMOs. This included Rs98.3 billion for a seven-day tenor at 11.14 percent and Rs55 billion for a 14-day tenor at 11.13 percent. The injection, fully accepted as offered, underscores the growing reliance on Shariah-compliant instruments to support liquidity needs of Islamic banks and the Islamic windows of conventional banks.
Open Market Operations remain a critical tool for SBP in managing day-to-day liquidity conditions within the banking system. By lending funds against eligible collateral, such as Market Treasury Bills (MTBs) and Pakistan Investment Bonds (PIBs), the central bank provides stability and ensures that short-term liquidity pressures do not disrupt the broader financial market. In contrast, OMO mop-ups involve the sale of securities to absorb excess liquidity when needed.
For Islamic banking operations, SBP utilizes Shariah-compliant mechanisms such as Bai-Muajjal, where Government of Pakistan Ijara Sukuk serve as eligible collateral. The continued use of Modarabah-based OMOs signals SBP’s commitment to deepening liquidity management options in line with the growth of the Islamic banking sector in Pakistan.
Analysts note that today’s injection reflects current liquidity strains within the system, which may stem from recent fiscal operations, settlement obligations, and the broader credit demand environment. By balancing injections across both conventional and Shariah-compliant channels, the SBP demonstrates its role in supporting the entire spectrum of the banking sector.
The dual injection of Rs266.6 billion provides short-term relief and stability to financial markets, ensuring that banks and primary dealers have the liquidity needed to sustain operations and meet customer obligations. With Pakistan’s economy navigating challenges such as fiscal adjustments and global financial uncertainties, liquidity management interventions by the SBP remain essential for maintaining confidence in the financial system.
As the money market continues to evolve, the SBP’s use of diverse instruments underscores the importance of flexibility in monetary policy operations. Both conventional and Islamic banks remain key participants in these transactions, with the outcomes directly impacting credit availability, interbank rates, and overall market sentiment.
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