The State Bank of Pakistan (SBP) has injected Rs177 billion worth of liquidity into the money market via an open market operation (OMO) through a reverse repo and Shariah Compliant Mudarabah, it said on Tuesday.

As per the SBP, of the Rs177 billion injected, Rs152.35 billion was injected for 3 days at 15.18% while Rs25 billion was injected for 3 days under Shariah Compliant Mudarabah at a 15.15% rate of return.

SBP injects Rs996 billion in OMO

OMO is a tool used by a central bank (or monetary authority) to inject or mop-up funds, based on the liquidity requirements, from the banking system via the purchase or sale of eligible securities.

Operationally, in case of OMO (Injections), SBP lends funds to banks/PDs against eligible collateral to address liquidity shortage in the system.

As per information available on the SBP website, the central bank conducts four types of OMOs to manage system’s liquidity: Injection – Reverse Repo: (To tackle short market positions), Mop-up – Repo (To tackle long market positions), Outright Sale or Purchase (long-term liquidity management), Bai-Muajjal (Islamic mode - Deferred Payment)

It is pertinent to mention that under the International Monetary Fund (IMF) programme, the government cannot borrow directly from the SBP. Thus, the central bank injects this liquidity into commercial banks, which use these funds to purchase government securities.

Under reverse repo, some 10 bids were placed by participants ranging between 15.35% and 15.17% for 3 days OMO, while 5 bids were received ranging between 15.29% to 15.14% for 3- days Shariah Compliant Mudarabah based OMO.

Earlier this month, the central bank injected Rs996 billion worth of liquidity into the money market through a reverse repo OMO.