The State Bank of Pakistan injected Rs2.06 trillion into the banking system on Friday through conventional and Shariah-compliant open market operations to meet increased liquidity needs linked to government borrowing.
Under the conventional open market operation, the SBP injected Rs1.728 trillion for five days at an average rate of 10.51%. Separately, Rs335 billion was provided through a Shariah-compliant Mudarabah-based OMO for the same tenor at a rate of 10.53%, according to the central bank.
Commenting on the development, Saad Hanif, head of research at Ismail Iqbal Securities, said liquidity conditions continue to reflect the banking sector’s central role in financing the fiscal deficit.
He said the Rs2.06tr injection showed that system liquidity tightens when government cash balances rise or tax collections accelerate, leading banks to depend on central bank funding to manage short-term mismatches.
Hanif noted that full bid acceptance in both conventional and Islamic OMOs indicated persistent liquidity demand driven by government financing requirements rather than private-sector credit growth. He added that, in such conditions, OMOs function primarily as an operational tool to recycle liquidity and keep money-market rates within the policy corridor.
Earlier this month, the SBP reduced its benchmark policy rate by 50 basis points to 10.5pc, after holding rates at 11pc for four consecutive policy meetings. The central bank last cut rates in May 2025.
With the latest reduction, the SBP’s Monetary Policy Committee has lowered the policy rate by a cumulative 1,150 basis points since it peaked at 22pc in June 2024.
