KARACHI: The central bank injected Rs2.54 trillion into conventional and Islamic banks for up to 28 days through open market operations (OMO) to help ease liquidity strains and ensure that banks have sufficient funds to continue lending, thereby supporting businesses and economic activity.
According to OMO results released by the State Bank of Pakistan (SBP) on Friday, Rs2.083 trillion was provided to conventional banks for a period of seven and 28 days at an interest rate of 12.05 per cent. Additionally, the SBP injected Rs455 billion into Islamic banks via Sharia-compliant Mudarabah-based OMO for both the seven-day and 28-day periods at 12.08 per cent.
Saad Hanif, head of research at Ismail Iqbal Securities, said the SBP stepped in to ease liquidity pressures in the banking system, which arose due to high government borrowing, debt repayments and slow deposit growth. By managing liquidity carefully, the SBP has helped keep money market rates stable and avoided unnecessary fluctuations.
“This move also ensures that banks have enough funds to continue lending, supporting businesses and economic activity. While banks are depending on the SBP for short-term cash needs, the central bank’s actions show its commitment to keeping the financial system stable and the economy moving forward,” Hanif said.
However, Hanif noted that the outstanding OMO amount has slightly decreased to Rs9.59 trillion, down from over Rs11-12 trillion in previous months.
The SBP’s data showed that the government repaid Rs1.35 trillion in debt to banks, including the SBP, between July 1, 2024 and January 25, 2025. This is a decrease compared to the Rs2.49 trillion borrowed during the same period a year earlier, with the loans primarily taken for budgetary support. Bank lending to the private sector rose significantly to Rs965.5 billion in the July-January FY25 period, compared to only Rs229 billion in the same timeframe last year.
Last month, the SBP reduced interest rates by 100 basis points (bps) to 12 per cent, citing declining inflation that allows policymakers to boost economic growth. This latest rate cut has brought the total reduction in borrowing costs to 1,000bps since June 2024.
In terms of fiscal performance, Pakistan reported a budget deficit of Rs1.54 trillion, or 1.2 per cent of GDP, in the first half of the fiscal year 2025. This compares to a deficit of Rs2.4 trillion, or 2.3 per cent of GDP, during the same period last year, according to data from the Ministry of Finance.
The total primary surplus for the July-December FY25 period amounted to Rs3.604 trillion, or 2.9 per cent of GDP. Total markup payments for the first six months of FY25 were Rs5.142 trillion.