SBP Injects Rs11.85 Trillion into Banks

The State Bank of Pakistan (SBP) has injected a substantial sum of Rs11.85 trillion into both conventional and Shariah-compliant financial institutions for durations of up to two weeks. This information was revealed on Friday.

According to analysts, these injections are intended to bolster liquidity within the banking sector. This move aims to help meet anticipated demands, primarily from the government, to finance its fiscal deficit.

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

Government Expenditures and Revenue Shortfall

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

As per the Ministry of Finance’s April 2025 Monthly Economic Update & Outlook, 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, which includes markup payments (18.2%) and non-markup expenditures (15.7%). Development spending saw a significant surge of 50.3%.

In contrast, the FBR faced a shortfall of Rs703 billion in tax revenue collection during the first nine months of FY25. The total collection amounted to Rs8.46 trillion against a target of Rs9.17 trillion for the period of July-March 2024-25.

Consequently, the government has revised the FBR’s annual tax collection target downwards from Rs12.91 trillion to Rs12.33 trillion for the ongoing fiscal year 2024-25.

Open Market Operations Details

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

Shariah-compliant banks received Rs151.50 billion at a rate of return of 12.10% for 14 days, and an additional Rs106 billion at 12.9% for 7 days.

Analyst Insights

Arif Habib Limited’s Head of Research, Sana Tawfik, noted that liquidity injection via OMOs remained elevated, nearing recent highs of Rs12 trillion for short durations of up to two weeks.

She added that this has resulted in conventional and Shariah-compliant commercial banks’ outstanding loans rising back to recent record highs of around Rs12 trillion from the central bank.

Banks required the fresh financing from the central bank to repay previous loans worth approximately Rs12 trillion, which they had obtained from the SBP about two weeks prior.

The SBP utilizes OMOs to provide financing to banks, which in turn, assist the government in addressing its fiscal deficit amidst revenue collection shortfalls.