The State Bank of Pakistan (SBP) conducted significant Open Market Operations (OMO) on February 27, 2026, injecting a total of Rs12.95 trillion into the banking system to address liquidity requirements. The majority of the injection, Rs12.45 trillion, was carried out through conventional reverse repo OMO, while the remaining Rs505 billion was deployed via Shariah-compliant Modarabah-based OMO, demonstrating SBP’s dual approach to managing liquidity across both conventional and Islamic banking channels.
In the conventional segment, the SBP conducted injections across two tenors: a seven-day reverse repo totaling Rs295 billion, accepted in full at an interest rate of 10.52%, and a 14-day reverse repo where Rs12.15 trillion was accepted out of Rs12.29 trillion offered at rates ranging between 10.51% and 10.58%. Notably, for the 14-day injection, the SBP accepted Rs5.76 trillion of the Rs5.91 trillion offered at 10.51% on a prorated basis, reflecting strong demand for short-term liquidity among banks and primary dealers (PDs).
The Shariah-compliant Modarabah-based OMO utilized the Bai Muajjal mechanism to cater to Islamic banking institutions and specialized windows of conventional banks. The SBP injected Rs131 billion for a seven-day tenure at 10.55% and Rs131 billion for a 14-day tenure at 10.53%, totaling Rs505 billion. Eligible securities for these Shariah-compliant injections included GOP Ijara Sukuk, in line with Islamic finance principles, ensuring liquidity management aligns with Shariah-compliant operational standards.
Open Market Operations are a critical monetary policy tool employed by SBP to regulate liquidity in the banking system. In injection operations, SBP lends funds to banks and primary dealers against eligible collateral, including Market Treasury Bills (MTBs) and Pakistan Investment Bonds (PIBs) for conventional banks, while Islamic instruments such as GOP Ijara Sukuk are used for Shariah-compliant operations. Conversely, OMO mop-up operations enable SBP to withdraw excess liquidity from the system by selling government securities to banks.
These injections are intended to stabilize the banking system, support short-term liquidity needs, and ensure smooth functioning of financial markets. By using both conventional and Shariah-compliant instruments, SBP demonstrates a comprehensive approach to liquidity management, accommodating the requirements of all banking segments while maintaining compliance with Islamic finance principles.
The February 27 operations highlight SBP’s proactive role in balancing liquidity, interest rate management, and market stability amid evolving economic conditions. Banks and PDs participated actively, signaling strong engagement with SBP’s liquidity facilities and continued reliance on central bank tools to meet funding requirements. These measures are crucial for sustaining confidence in Pakistan’s financial system and supporting broader monetary policy objectives, including credit availability, interest rate guidance, and financial market efficiency.
Overall, the Rs12.95 trillion liquidity injection reinforces SBP’s commitment to both conventional and Islamic banking sectors, ensuring that institutions have access to necessary funding while maintaining regulatory compliance and operational stability across Pakistan’s financial ecosystem.
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