The State Bank of Pakistan (SBP) injected a staggering Rs11.85 trillion into the banking system through conventional and Shariah-compliant Open Market Operations (OMOs) to ease liquidity constraints and support the government’s fiscal financing needs, the central bank confirmed on Friday.
This significant liquidity injection, aimed at tenors of up to 14 days, comes amid rising government reliance on domestic borrowing due to mounting expenditures and a shortfall in tax revenue collection by the Federal Board of Revenue (FBR). Analysts said the move was critical to ensure banks have sufficient liquidity to meet short-term obligations, particularly those linked to lending to the government.
According to central bank data, SBP conducted Reverse Repo Purchase OMOs on April 25, accepting Rs11.15 trillion through 23 bids at a fixed return of 12.03% for the 14-day tenor. Additionally, Rs447.45 billion was injected for seven days through 12 bids at 12.09%.
In a parallel move, SBP also injected Rs257.5 billion into Shariah-compliant banks through Mudarabah-based OMOs. Of this, Rs151.5 billion was accepted for 14 days at a 12.10% return, while Rs106 billion was issued for 7 days at 12.09%.
Head of Research at Arif Habib Limited, Sana Tawfik, noted that the liquidity injections have remained near the record Rs12 trillion mark in recent weeks. “This has pushed the outstanding borrowing of commercial banks—both conventional and Islamic—back to historic highs,” she said, adding that most of the borrowed funds are used to finance the government’s budget deficit.
The Ministry of Finance reported that total government expenditure rose 23.2% year-on-year to Rs10.36 trillion during July–March FY2024–25. Development spending surged by over 50%, while markup payments and non-markup current expenditures also saw double-digit increases. Meanwhile, the FBR collected Rs8.46 trillion during the same period—Rs703 billion short of its target—prompting the government to revise the annual tax collection goal from Rs12.91 trillion to Rs12.33 trillion.
With mounting fiscal pressure and a shortfall in revenue, the SBP’s short-term liquidity support has once again emerged as a critical instrument for maintaining financial system stability.
