ISLAMABAD: Future monetary policy making will be shifted to a specialised body led by State Bank of Pakistan governor and will include parliament nominees as well as bankers and government officials on its board.
“As soon as the Senate approves a relevant proposal, the State Bank will lose the power to formulate the monetary policy and a Monetary Policy Committee (MPC) will assume the said responsibility,” an official informed.
The State Bank of Pakistan Amendment Bill 2015 has already been passed by the National Assembly. The bill, however, will become a law after the presidential approval.
According to the amended bill, the central bank will not formulate the monetary policy and a committee will be established for this purpose.
The powers and functions of the monetary policy committee will be the same as that of the State Bank in this regard but it will be mandated to support the general economic policies of the federal government.
MPC’s main functions would be to formulate, support and recommend the monetary policy, make decisions related to key interest rates and supply of reserves in Pakistan and may make regulations for their implementation.
The law states that the function of the MPC would be to ‘approve and issue the monetary policy statement and other monetary policy measures’.
The new law states that all recommendations of the MPC will be taken by the majority members present in the meeting. The law adds that the governor state bank or deputy governor in his absence will chair the committee.
The MPC’s composition includes three senior executives of the SBP to be nominated by the governor state bank.
Three members of the SBP Board are to be nominated by the Board itself, while, there will be three external members from the private sector.
These external members will be economists to be appointed by the federal government on the recommendation of the State Bank Board. The external members of the MPC will be appointed for a period of three years and could be reappointed for another term of three years.
Meanwhile, Senate Standing Committee on Finance chairman Senator Salim Mandviwala told Dawn that parliamentarians who meet the criterion of an economist can also become members of the MPC as one of the external members.
“Previously, the monetary policy was formulated by the State Bank Board, and according to the law a parliamentarian cannot be part of the SBP Board.
This is significant step as formulation of monetary policy has been broadened,” he said.