The State Bank of Pakistan (SBP) stepped in to address liquidity needs in the banking system by injecting a substantial Rs1.72 trillion through a mix of conventional and Shariah-compliant Open Market Operations (OMO) on Friday. The latest liquidity operation underlines SBP’s active monetary management strategy aimed at stabilizing short-term rates and supporting the smooth functioning of Pakistan’s money markets amid evolving financial pressures.
Breaking down the central bank’s intervention, the bulk of the liquidity — approximately Rs1.47 trillion — was infused into the market via conventional reverse repo transactions. According to detailed results shared by the SBP, the 7-day tenor reverse repo saw Rs154.25 billion accepted at a cut-off rate of 11.09 percent, compared to offers totaling Rs165.95 billion, with market quotes ranging between 11.12 and 11.06 percent.
A significantly larger tranche came through the 14-day tenor, where the central bank accepted Rs1.32 trillion against offers of Rs1.32 trillion, at a cut-off rate of 11.07 percent, slightly below the market quote spread of 11.11 to 11.03 percent. Collectively, these transactions helped the SBP maintain an orderly interbank rate corridor and reinforced its short-term liquidity stance without altering the broader monetary tightening posture adopted in response to inflationary challenges.
In parallel to the conventional operations, the SBP also deployed Islamic liquidity tools by conducting a Shariah-compliant Modarabah-based OMO. This transaction saw an additional Rs243 billion injected into the market. Under this arrangement, Rs40 billion was accepted in a 2-day tenor at a uniform cut-off rate of 11.13 percent, while Rs203 billion was absorbed through a 14-day tenor at 11.12 percent.
These Shariah-compliant operations underscore SBP’s commitment to providing tailored liquidity support for Islamic banks and the dedicated Islamic windows of conventional institutions. Such instruments rely on structures like Bai-Muajjal and Modarabah transactions using GOP Ijara Sukuk as eligible collateral, reflecting Pakistan’s parallel approach to managing both conventional and Islamic money markets.
The use of OMOs remains a central element of SBP’s toolkit to steer short-term liquidity. In injection OMOs, the SBP lends funds against eligible collateral — typically Market Treasury Bills (MTBs) and Pakistan Investment Bonds (PIBs) — to help banks meet their daily funding needs. In contrast, mop-up OMOs are conducted when the central bank seeks to absorb excess liquidity by selling these securities back into the market, thereby tightening the monetary stance when required.
These operations are not just technical market adjustments but serve broader policy objectives. By carefully calibrating liquidity injections, the SBP aims to prevent undue volatility in overnight and short-term rates, ensuring that monetary transmission remains intact and banks continue to finance productive economic activity even amid external headwinds and domestic fiscal adjustments.
The latest figures reaffirm SBP’s proactive approach in maintaining a balanced liquidity environment that supports both stability and growth imperatives. As Pakistan navigates complex economic conditions, including external account pressures and ongoing structural reforms, such targeted interventions in the interbank market will continue to play a crucial role in safeguarding financial sector resilience.