The State Bank of Pakistan (SBP) undertook significant Open Market Operations (OMO) on Friday, injecting a total of Rs11.78 trillion into the financial system to address liquidity shortages and ensure stability across the banking sector. Of the total injection, Rs11.5 trillion was provided through conventional reverse repo operations, while Rs277 billion was deployed via Shariah-compliant Modarabah-based OMO, marking one of the largest liquidity injections in recent times.
The conventional reverse repo operation included both seven-day and fourteen-day tenors. For the seven-day tenor, banks offered Rs825.65 billion, of which Rs675 billion was accepted at an interest rate of 11.01%. Meanwhile, for the fourteen-day tenor, Rs11.32 trillion was offered and Rs10.85 trillion accepted, with rates ranging from 11.01% to 11.07%. These operations were primarily aimed at injecting funds into the system while maintaining interest rate stability in line with monetary policy objectives.
In parallel, the Shariah-compliant OMO, conducted under the Modarabah-based framework, injected Rs277 billion through a seven-day reverse repo at an accepted rate of 11.05%. This operation allows Islamic banks and specialized Islamic windows of conventional banks to access liquidity in a manner fully compliant with Shariah principles. No fourteen-day tenor was conducted under the Shariah-compliant operation during this round.
Open Market Operations are a key monetary policy tool used by the SBP to manage liquidity in the banking system. In injection operations, the central bank lends funds to banks and primary dealers (PDs) against eligible collateral, including Market Treasury Bills (MTBs) and Pakistan Investment Bonds (PIBs) for conventional banks, and GOP Ijara Sukuk for Shariah-compliant operations. These measures are designed to ensure that banks have adequate liquidity to meet operational and lending requirements.
Conversely, OMO mop-up operations allow the SBP to absorb excess liquidity by selling MTBs to banks against cash. By balancing injections and mop-ups, the SBP can maintain short-term interest rate stability, control inflationary pressures, and support overall financial market functioning.
The scale of the injection reflects ongoing efforts by the SBP to address temporary liquidity shortages in the market, especially in the backdrop of heightened financial market activity and fiscal pressures. By combining conventional and Shariah-compliant tools, the central bank is also promoting inclusivity in the banking sector, providing liquidity solutions that cater to both conventional and Islamic financial institutions.
Analysts note that such large-scale OMO injections are likely to ease interbank market pressures, stabilize short-term interest rates, and provide banks with additional capacity to support lending and economic activity. The coordinated use of conventional and Islamic instruments highlights SBP’s proactive approach to liquidity management and monetary policy implementation.
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