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“SBP Infuses Rs 5.6 Trillion into Market Via Reverse Repo and Modarabah Open Market Operations”

 

SBP Injects Rs 5.6 Trillion into Market with Dual OMOs to Bolster Liquidity

The State Bank of Pakistan (SBP) has executed a significant financial maneuver, conducting two distinct types of Open Market Operations (OMOs) on Friday, leading to an injection of a hefty Rs 5.6 trillion into the market. This move is aimed at enhancing liquidity support in the financial system.

Out of the total amount, a substantial Rs 5.3 trillion was channeled through a reverse repo OMO, set for a duration of seven days. This operation bears an interest rate of 7.25 percent. The reverse repo OMO serves as a critical tool for the central bank, allowing it to absorb surplus funds from the banking sector, thereby aiding in controlling inflationary pressures.

Furthermore, an additional Rs 200 billion was infused into the market via a Shariah-compliant Modarabah-based OMO. This operation, spanning three days, comes with a profit rate of 7.28 percent. The Modarabah OMO stands as a significant alternative for Islamic banking entities, offering them a Shariah-aligned option alongside conventional OMOs.

The SBP’s strategy of regularly conducting OMOs is a key aspect of its monetary policy, primarily aimed at regulating the money supply and stabilizing interest rates within the economy. These operations are also influenced by factors such as the government’s borrowing needs and the status of foreign exchange reserves.