State Bank of Pakistan (SBP) conducted a large-scale reverse repo and Shariah-compliant Modarabah-based Open Market Operation (OMO), injecting a total of Rs3.45 trillion into the banking system to address short-term liquidity needs. Out of the total amount, Rs3.25 trillion was injected through conventional reverse repo OMOs, while Rs193 billion came through Shariah-compliant operations.
The injection reflects SBP’s active liquidity management strategy amid tight interbank conditions and evolving macroeconomic dynamics. According to official data, the central bank accepted almost the entire amount offered, signaling a calibrated approach to ensuring financial stability.
For the conventional OMO, SBP injected Rs297.1 billion under the 7-day tenor and Rs2.96 trillion under the 14-day tenor. The accepted rates ranged between 11.00 percent and 11.07 percent, with a weighted average rate of 11.01 percent. This move provided much-needed liquidity to commercial banks and primary dealers, enabling them to manage short-term funding obligations more effectively.
On the Shariah-compliant side, SBP injected Rs193 billion under a 7-day Modarabah-based structure at a fixed accepted rate of 11.11 percent. No bids were received for the 14-day tenor under the Islamic instrument, indicating stronger demand for shorter-duration liquidity support.
Open Market Operations are a key monetary policy tool that allows SBP to either inject or mop up liquidity from the banking system, depending on prevailing conditions. Through OMO injections, SBP provides funds to commercial banks and primary dealers against eligible government securities such as Market Treasury Bills (MTBs) and Pakistan Investment Bonds (PIBs).
For Shariah-compliant transactions, the eligible collateral includes GOP Ijara Sukuk, which are structured in line with Islamic finance principles. These instruments allow Islamic banks and specialized Islamic windows of conventional banks to participate in liquidity management operations without engaging in interest-based transactions.
OMO mop-ups work in the opposite direction, where SBP removes excess liquidity from the system by selling MTBs to banks. This flexible mechanism enables the central bank to maintain monetary stability, influence short-term interest rates, and ensure smooth functioning of the interbank market.
Market analysts believe this latest liquidity injection signals SBP’s proactive stance in supporting the financial sector amid fluctuating macroeconomic conditions and upcoming fiscal flows. By addressing immediate liquidity needs, the central bank aims to reduce volatility in the money market and support smooth settlement of interbank obligations.
The scale of this operation also underscores the growing importance of liquidity management tools in a tightening economic environment. Analysts expect similar interventions in the coming weeks, particularly as the banking sector navigates fiscal year-end pressures, external account adjustments, and seasonal cash demand.
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