Abstract:
The assessment provides the statistical evidence that the State Bank of Pakistan interest rate is also being affected by the Sukuk- backed Open Market Operations conducted by SBP for liquidity management of Islamic Banking Institutions through Bai’ Mua’jjal Transactions (in outright sale of GoP Ijara Sukuk to IBIs in order to mop up the excess liquidity) likewise OMS conducted by SBP for conventional banks which is contrary to Sharia compliant theme. Further, this paper analyzes the mechanism of Sukuk-backed Bai Mua’jjal transactions that statistically shows that (outright purchase of GoP Ijara Sukuk) does not affect quantum of money in circulation, as result OMOs effect is quite negligible on interest rate which also does not fulfill the purpose of OMO, rather it is merely accounting entries passed by SBP in the accounts of IBIS and GoP accounts maintained with SBP, for recording purpose. This study is based on Bai Mua’jjal transactions conducted by SBP during the period from Oct, 2014 to June, 2016 for facilitation of Islamic banking Institutions to manage their liquidity issues through Sukuk-backed OMOs and its impact on interest rates as a ratio to the total amount of OMOs conducted by SBP for conventional banks during the same period. This study emphasizes the need of a revision of Sukuk-backed OMOs being conducted by SBP for IBIs to manage their liquidity through Bai Mua’jjal transactions and emphasis on the need of proper monetary policy tools for this purpose. Keywords: Bal Mua’jjal, Open Market Operation (OMO), Repo, Reverse Repo, Outright Sale, Outright Purchase, Sukuk, policy rate/Interest Rate.
