SBP Injects Rs11.85 Trillion into Banking System

The State Bank of Pakistan (SBP) has injected a substantial amount of Rs11.85 trillion into both conventional and Shariah-compliant commercial banks for a period of up to 14 days. This was reported on Friday.

According to analysts, these injections are intended to bolster liquidity within the banking sector. This move is designed to address the anticipated surge in demand, primarily from the government, to finance its fiscal deficit.

The government’s reliance on domestic borrowing has increased due to rising expenditures and a shortfall in tax revenue collected by the Federal Board of Revenue (FBR).

Commercial Banks Borrow Heavily from SBP

Commercial banks have borrowed Rs9.61 trillion from the SBP for a duration of 7 days.

The Ministry of Finance, in its April 2025 Monthly Economic Update & Outlook, stated that “total expenditures increased by 23.2% to Rs10.36 trillion in July-March fiscal year 2024-25, with current spending rising by 17.2% to Rs9.56 trillion, including markup payments (18.2%) and non-markup expenditures (15.7%). Development spending saw a significant increase of 50.3%.”

Furthermore, it was revealed that the FBR’s tax revenue collection experienced a shortfall of Rs703 billion in the first nine months of FY25. The total collection during July-March 2024-25 amounted to Rs8.46 trillion, against a target of Rs9.17 trillion.

The government has adjusted the FBR’s annual tax collection target downwards from Rs12.91 trillion to Rs12.33 trillion for the current fiscal year 2024-25.

An analysis of the central bank’s open market operations (OMO) data indicated that the bank provided Rs11.15 trillion to commercial banks at an interest rate of 12.03% for 14 days. Additionally, it injected Rs447.45 billion into the banking system at an interest rate of 12.09% for 7 days.

Moreover, Rs151.50 billion was injected into Shariah-compliant banks at a rate of return of 12.10% for 14 days, with an additional Rs106 billion supplied at 12.9% for 7 days.

Arif Habib Limited’s Head of Research, Sana Tawfik, noted that the liquidity injection through OMOs has remained high, nearing its recent peak of Rs12 trillion for short durations of up to two weeks.

She added, “This has resulted in conventional and Shariah-compliant commercial banks’ outstanding loan balance rising back to the recent record high at around Rs12 trillion from the central bank.”

Banks required fresh financing from the central bank to repay their previous loans, which were close to Rs12 trillion, obtained from SBP approximately two weeks prior.

The SBP conducts OMO to provide financing to banks, which in turn, support the government in financing its fiscal deficit amidst revenue collection shortfalls.