SBP pumps Rs11.85 trillion into banking system to stabilise market liquidity

KARACHI: The State Bank of Pakistan (SBP) has injected a massive Rs11.85 trillion into both conventional and Shariah-compliant banks through open market operations (OMOs) to help ease liquidity pressures.

According to market analysts, the central bank’s move is aimed at ensuring banks have sufficient cash to meet the government’s growing borrowing needs, driven by an expanding fiscal deficit.

Amid rising expenditures and a shortfall in tax revenue, the government has once again increased its dependence on domestic borrowing.

The Ministry of Finance, in its Monthly Economic Update and Outlook for April 2025, reported that total expenditures in the first nine months of the current fiscal year (July–March FY25) surged by 23.2 per cent to Rs10.36 trillion.

Of this, current spending stood at Rs9.56 trillion—up 17.2 per cent—mainly due to higher markup payments and non-markup expenses. Meanwhile, development expenditure jumped by 50.3 per cent.

On the revenue side, the Federal Board of Revenue (FBR) faced a shortfall of Rs703 billion, collecting Rs8.46 trillion during July–March FY25 against a target of Rs9.17 trillion. In response to the shortfall, the government has revised its annual tax collection target downward from Rs12.91 trillion to Rs12.33 trillion.

Data from the SBP showed that it provided Rs11.15 trillion to commercial banks for 14 days at an interest rate of 12.03 per cent. An additional Rs447.45 billion was supplied for a shorter period of 7 days at 12.09 per cent.

According to Business Recorder, for Shariah-compliant banks, the central bank injected Rs151.5 billion for 14 days at a return rate of 12.10 per cent, along with another Rs106 billion for 7 days at 12.9 per cent.

Through OMOs, the central bank supplies funds to commercial banks, which in turn lend to the government, particularly when revenue collections fall short and fiscal financing needs rise.

Read next: Debt repayments trigger $366m drop in SBP’s forex reserves