Formulation of exchange rate policy: SBP proposes amendment Bill-2021 to acquire more power

ISLAMABAD: The State Bank of Pakistan’s amended Bill-2021 has been proposed to the new Board of Directors (BoDs) for approval with the mandate to keeping administrative and management powers, including the formulation of exchange rate policy.

Reports said instead of supporting any efforts of achieving growth, the SBP’s proposed amendment has defined the objectives of the SBP, restricted only to the price stability, elaborating that the primary objective of the Central Bank is to achieve and maintain domestic price stability. Without any prejudice, the Bank shall contribute to the stability of financial system of the country, while subject to sub section (1), and (2), the bank shall support the government’s general economic policies with a view to contributing to foster development and fuller utilisation of the productive resources.

The amendment into the SBP Act also proposed abolishing Monetary and Fiscal Coordination Board (MFCB) that was chaired by the minister for finance with the representation of different ministries. Now the proposed amendment bill will replace the SBP Act of Section-9 with the meeting of Board of Directors shall consist of governor SBP and eight non executive directors, including one from each province, the deputy governor shall attend the meeting without having right to vote. The governor shall chair the Board and in his absence, the deputy governor will preside over the meeting, while the non executive members shall be eminent professionals from the field of economics, finance, banking, law, information technology, risk management, and accountancy to perform the oversight.

For the revival of the IMF program, the government plans to table proposed amendments before the federal cabinet on Tuesday (today), scheduled to be held under the chairmanship of Prime Minister Imran Khan. Under the IMF program, the government had earlier missed the deadline to table amendment Bill-2021 into the SBP Act-1956 till March 31, 2020, before the parliament mainly because of the Covid-19 and lack of consensus among different stakeholders also caused the delay for finalising the draft of the bill. The tenure of the governor, deputy governor and non executive members was proposed to be increased from three to five years and shall be eligible for one re-appointment for another term.

Under the SBP’s upcoming draft amendment Bill-2021, it has been proposed to insert the new Section as 9F into SBP Act-1956 under the proposed draft of the amendment Bill of SBP 2020 to establish an executive board, which shall be responsible for the administration and management of the bank as well as the policy matters, excluding those falling into the jurisdiction of the monetary policy committee or the BoDs and it shall meet at least once in a week. The executive board shall consist of the governor SBP and deputy governor SBP. The function of the board shall include formulation of the exchange rate policy and the regulatory framework will be applicable to the regulated entities under the Act and any other law administered by the bank. For tenures of appointments, it has been proposed that the external members of the monetary policy shall be appointed for five-year term and shall be eligible for one re-appointment for another term of five years. No person shall hold the office of the governor or deputy governors after reaching the age of 65 years.