The State Bank of Pakistan (SBP) conducted a major liquidity injection today, deploying a total of Rs9.99 trillion into the financial system through both conventional reverse repo and Shariah-compliant Modarabah-based Open Market Operations (OMO). This strategic move reflects the central bank’s proactive approach to managing market liquidity and supporting financial stability.
Of the total injection, Rs9.6 trillion was provided through conventional reverse repo OMO, aimed at meeting short-term liquidity needs of commercial banks and primary dealers. Under the conventional mechanism, the central bank offered funds across different tenors, including 7-day and 14-day instruments. For the 7-day reverse repo, SBP accepted Rs407.85 billion at an effective rate of 11.01%, while the 14-day reverse repo saw Rs9.2 trillion accepted at the same rate. The range of quotes during the operations varied slightly, reflecting competitive bidding from banks.
Meanwhile, Rs387.5 billion was injected through a Shariah-compliant Modarabah-based OMO, designed specifically to meet the liquidity requirements of Islamic banks and specialized Islamic windows of conventional banks. For the 7-day tenor, Rs294.5 billion was accepted at an effective rate of 11.13%, while the 14-day tenor saw Rs93 billion injected at 11.09%. These transactions were backed by eligible securities, primarily GOP Ijara Sukuk, ensuring compliance with Islamic financial principles.
Open Market Operations are a core tool used by SBP to manage systemic liquidity by lending or absorbing funds from the banking system through eligible collateral, including Market Treasury Bills (MTBs) and Pakistan Investment Bonds (PIBs). In conventional reverse repo operations, SBP lends funds to banks and primary dealers against these securities to address short-term liquidity shortages. Conversely, in mop-up operations, the central bank sells MTBs to remove surplus liquidity from the system.
The Shariah-compliant Modarabah mechanism allows Islamic financial institutions to access liquidity while adhering to religious and ethical banking principles. In this case, GOP Ijara Sukuk serve as the eligible collateral, and the mechanism operates under the Bai-Muajjal framework, providing banks with a compliant alternative to conventional liquidity tools.
SBP officials emphasized that today’s Rs10 trillion injection is part of an ongoing effort to maintain stable financial conditions in the country. By deploying both conventional and Islamic instruments, the central bank ensures that liquidity support reaches all segments of the banking system, facilitating smooth operations and reinforcing confidence in the broader financial markets.
Market analysts note that such large-scale OMOs are crucial in a dynamic economic environment, where fluctuations in liquidity can directly affect interest rates, credit availability, and overall financial stability. By offering a combination of tenors and both conventional and Shariah-compliant tools, SBP provides flexibility to banks while signaling its commitment to sustaining a stable monetary framework.
This latest operation underscores SBP’s continued focus on liquidity management, ensuring that the banking system remains resilient and capable of supporting economic growth while meeting both conventional and Islamic banking requirements.
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