The State Bank of Pakistan (SBP) conducted a reverse repo-based Open Market Operation (OMO) today, injecting Rs 575.8 billion into the banking system to address liquidity shortages.
According to the SBP’s announcement, the injection was executed at a rate of 13.07% for a tenor of eight days. The central bank accepted all offered bids, amounting to Rs575.8 billion.
| Date | Type | Tenor (Days) | Amount Offered (PKR Million) | Number of Bids | High |
Low |
Amount Accepted (PKR Million) | Accepted Bids | Accepted Rate (%) |
|---|---|---|---|---|---|---|---|---|---|
| 26-Dec-24 | Reverse Repo | 8 | 575,800 | 3 | 13.10 | 13.07 | 575,800 | 3 | 13.07 |
OMO is a key monetary policy instrument employed by the SBP to manage liquidity in the banking system. Through OMO (Injections), the central bank lends funds to banks and Primary Dealers (PDs) against eligible collateral, such as Market Treasury Bills (MTBs) and Pakistan Investment Bonds (PIBs). This mechanism helps address short-term liquidity shortages in the market.
Conversely, in OMO (Mop-up), the SBP sells MTBs to banks to remove surplus liquidity from the system. Eligible collateral for mop-up operations includes government securities like MTBs, which are sold on a repo or outright basis.
The SBP also uses Bai-Muajjal, a Shariah-compliant liquidity management tool, to accommodate the Islamic banking sector. Under this method, the government sells Ijara Sukuk to Islamic banks or Islamic windows of conventional banks to manage liquidity.
By injecting funds into the banking system, the SBP aims to ensure smooth functioning of financial markets, stabilize short-term interest rates, and facilitate lending operations by banks. The measure is crucial for maintaining monetary stability, particularly during periods of tight liquidity.
The banking sector relies on OMOs to meet its short-term funding needs, while the SBP uses this tool to influence market liquidity and implement its monetary policy objectives. Today’s operation reflects the central bank’s proactive approach in managing liquidity dynamics and supporting the overall financial ecosystem.
This development comes as part of the SBP’s ongoing commitment to ensuring a stable and efficient monetary environment, crucial for economic growth and stability.
