ISLAMABAD: The President on Saturday gave his assent to the State Bank of Pakistan (Amendment) Bill, 2012 to strengthen the power of the Central Board of the State Bank to formulate and implement monetary policy and control government borrowing. The Bill was passed by the National Assembly on 4th November, 2010 and subsequently introduced in the Senate.
It was passed by the Senate in May last year with amendments. It was again passed by the National Assembly last month with the amendment made by the Senate. Spokesperson Farhatullah Babar said under the Amendment Bill, SBP may require banks or financial institutions to hold minimum reserves on deposit accounts with the Bank in pursuance of its monetary policy objectives. Powers of the federal government to supersede the Central Board have also been withdrawn, he said.
A new sub-section in the Bill says, "The Bank, the members of the Central Board or the staff of the Bank shall not take instructions from any other person or entity, including government or quasi-government entities. The autonomy of the Bank shall be respected at all times and no person or entity shall seek to influence the members of the Central Board and Monetary Policy Committee or the staff of the Bank in the performances of their functions or interfere in the activities of the Bank."
Power of the Central Board to formulate and implement Monetary Policy has been strengthened by adding two eminent monetary economists with sufficient research and teaching experience. For the purpose of regulating the monetary and credit system, SBP may issue certificates of deposit and new instruments including those that are Shariah-compliant.
Under the amendment, government borrowing shall be brought to zero at the end of each quarter barring the ways and means limit should be determined by the Central Board from time to time. The debt of the federal government owed to the Bank as on the 30th April, 2011, shall be retired not later than eight years from that date.
If any of the provisions about government borrowing are not observed by the federal government, the finance minister shall place before the Parliament a statement giving detailed jurisdiction for the said failure. The Amendment empowers the State Bank to purchase, hold and sell currencies and instruments, including indices and derivatives, issued by governments, agencies, local authorities, corporate and supranational in countries whose currency has been declared as approved foreign exchange. -PR
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