The State Bank of Pakistan (SBP) conducted a major liquidity injection into the banking system on December 26, 2025, through conventional reverse repo and Shariah-compliant Modarabah-based Open Market Operations (OMO), totaling Rs2.06 trillion.
Under the conventional OMO, SBP injected Rs1.728 trillion into the market via a 5-day reverse repo, with the accepted rate ranging between 10.51% and 10.61%, settling at 10.51%. All offered funds were accepted by the counterparties, reflecting strong demand for short-term liquidity.
Meanwhile, the Shariah-compliant Modarabah-based OMO contributed Rs335 billion to the system. This 5-day injection carried an accepted rate of 10.53%, with bids ranging from 10.53% to 10.57%, and all offered funds were fully accepted. These operations are designed to provide liquidity support to Islamic banking institutions and specialized Islamic windows of conventional banks.
An Open Market Operation is a key monetary policy tool used by the SBP to manage liquidity in the banking system. In OMO injections, the central bank lends funds to banks and primary dealers (PDs) against eligible collateral, which includes marketable government securities such as Market Treasury Bills (MTBs) and Pakistan Investment Bonds (PIBs). For Shariah-compliant operations like Bai-Muajjal, GOP Ijara Sukuk are eligible as collateral.
Conventional OMOs help address temporary liquidity shortages by providing short-term funding, while mop-up operations allow SBP to withdraw excess liquidity by selling MTBs to banks. Both tools are critical for stabilizing short-term interest rates and ensuring efficient functioning of the interbank market.
SBP’s liquidity injections are part of its ongoing efforts to maintain monetary stability amid evolving market conditions. By offering both conventional and Shariah-compliant instruments, the central bank ensures adequate support to the entire banking sector, including Islamic banking institutions, while safeguarding systemic liquidity.
This combined injection of Rs2.06 trillion demonstrates SBP’s proactive approach in managing liquidity and short-term rates, supporting smooth functioning of the financial system and providing banks with the necessary resources to meet operational requirements.
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