In an effort to encourage financial institutions to offer steady funding to the government, Pakistan’s central bank has infused over Rs743b into commercial and Shariah-compliant banks for up to 63 days at a return of 15.11pc. Commercial banks’ borrowing from the central bank, on the other hand, has been reduced drastically tobillions of rupees from trillions ahead of the government’s expected hefty return of money over the next month. According to the data, the State Bank of Pakistan (SBP) has supplied over Rs546b to commercial banks over 63 days and another Rs158b over seven days through open market operations (OMOs). Similarly, it gave Shariah-compliant banks Rs1.10b for 63 days and another Rs38b for seven days.She anticipated that the government will return approximately Rs4 trillion to commercial banks by September 20, 2022. “As a result, commercial banks do not need to borrow from the central bank because borrowing has a cost (15.11pc).” Commercial banks will reinvest the monies obtained from the government in sovereign debt securities such as T-bills and PIBs, which are used by the government to borrow from banks. According to the new restrictions, the central bank cannot directly pay the government’s financial needs. As a result, it injects funds into commercial banks via OMOs, and the monies are subsequently extended to the government by commercial and Shariah-compliant financial institutions. The rate of return on central bank loans to financial institutions has stayed constant at 15.11pc, similar to the historical average. Previously, commercial banks borrowed between Rs1.19 trillion and Rs1.86 trillion for 63 days a couple of times between May and July 2022, and purchased cash numerous times between late February and May 2022, for a total of seven days. The rate of return on central bank lending to financial institutions has stayed consistent at 15.11pc, close to the historic high of 15.15pc reached in the first week of August 2022. She went on to say that the rate of return “typically remains somewhat higher than the central bank’s key policy rate, which is now at 15pc.” The six-month Karachi Interbank Offered Rate (Kibor), at which commercial banks lend to one another, is likewise hovering at 16pc these days. She remembered that commercial banks have continued to raise the rate of return on government financing in light of the government’s significant need for budgetary financing and the country’s multiyear high inflation reading. The 63-day OMO also forecasts that the central bank would maintain its key policy rate at 15pc at its next monetary policy meeting on August 22, 2022.