SBP Injects Rs11.85 Trillion into Banks

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

According to an analyst, these injections are designed to bolster liquidity within the banking sector, enabling it to effectively meet anticipated demands, predominantly from the government, aimed at funding its fiscal deficit.

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

Commercial Banks Borrow Heavily

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 during July-March fiscal year 2024-25. Current spending rose by 17.2% to Rs9.56 trillion, encompassing markup payments (18.2%) and non-markup expenditures (15.7%). Development spending saw a surge of 50.3%.

Conversely, it has been noted that FBR’s tax revenue collection experienced a shortfall of Rs703 billion in the initial nine months of FY25. The collected amount during July-March 2024-25 totaled Rs8.46 trillion, falling short of the Rs9.17 trillion target.

The government has adjusted downward the FBR’s annual tax collection target, revising it 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 reveals that the bank provided Rs11.15 trillion to commercial banks at an interest rate of 12.03% for 14 days. Furthermore, an additional Rs447.45 billion was injected into the banking system at an interest rate of 12.09% for 7 days.

An amount of Rs151.50 billion was allocated to Shariah-compliant banks at a rate of return of 12.10% for 14 days. Additionally, Rs106 billion was supplied to these institutions at a rate of 12.9% for 7 days.

Arif Habib Limited’s Head of Research, Sana Tawfik, observed that liquidity injections through OMOs remained significantly high, nearing the recent peak of Rs12 trillion for short periods of up to two weeks.

She added that this activity has led to conventional and Shariah-compliant commercial banks’ outstanding loans rising back to the recent record high of approximately Rs12 trillion from the central bank.

Banks required the fresh financing from the central bank to settle their prior debts, which amounted to nearly Rs12 trillion, obtained from SBP roughly two weeks prior.

The SBP utilizes OMO to provide financing to banks, which in turn extend credit to the government, assisting in financing the fiscal deficit amid revenue collection shortfalls.