Qudsia Bano

The State Bank of Pakistan (SBP) provided a major liquidity boost to the banking system on Sept 8 (Monday) by conducting two separate Open Market Operations (OMOs), one conventional and one Shariah-compliant, injecting more than Rs316 billion into the financial system.

Under the conventional OMO, the central bank conducted a four-day reverse repo purchase operation. Banks placed six bids in the rate range of 11.10% to 11.07%. The central bank accepted the entire amount of Rs238.4 billion face value, equivalent to a realised value of Rs235.25 billion. The rate of return was settled at 11.07% per annum.

In a parallel move, SBP also carried out a Shariah-compliant Mudarabah-based OMO for the same tenor of four days. This attracted two bids within a narrow rate range of 11.15% to 11.14%. The full amount of Rs78 billion face value, or Rs78.82 billion realised value, was accepted at a return of 11.14%.

By accepting all bids in both conventional and Islamic modes, the central bank injected a combined total of Rs316.4 billion on a face value basis. The realised value of funds provided stood at around Rs314.08 billion.

These short-term liquidity injections are part of the central bank’s routine efforts to ensure stability in the money market and provide banks with adequate funds to meet their financing needs. The simultaneous use of conventional and Shariah-compliant windows reflects SBP’s dual approach in catering to the diverse banking landscape of Pakistan.

This move was necessary as Pakistan is dealing with persistent fiscal and external account pressures, where higher government borrowing requirements have tightened liquidity in the banking system. With inflation still elevated and foreign inflows limited, banks have faced increased demand for short-term funding to meet settlement obligations.

By injecting liquidity through these operations, the State Bank aimed to stabilise interbank rates, ensure smooth government financing, and prevent temporary cash shortages from disrupting financial flows in the economy.

Credit: INP-WealthPk