SBP delays monetary policy meeting as govt holds up board nominations

KARACHI: The State Bank of Pakistan (SBP) on Thursday delayed its monetary policy meeting for the January-February period after the government failed to complete the appointments of new independent members to the bank’s policy board in time.

“As soon as the nominations are received, the SBP will issue schedule for the monetary policy meeting,” Abid Qamar, Chief Spokesman of the central bank, said. “The SBP has not received nominations of external members from the ministry of finance to complete the committee.”

The central bank holds monetary policy committee meeting bimonthly. The bank usually holds it in the later part of month. In its last meeting in November, the bank kept the target policy rate unchanged at six percent after cutting it by 350 basis points since November 2014 to a 42-year low.

The discount rate or the SBP’s reverse repo rate was also kept at 6.5 percent in the third monetary policy announcement for the current fiscal year. 

The board of central bank’s monetary policy has been reconstituted recently and now a 10-member penal including the country’s top economic minds will set the benchmark interest rate. But nominations of three independent economists by the government for the 10-member board would bring it to full strength.

The new monetary policy committee will replace the current structure, in which the central bank’s board of directors decides on the benchmark rate based on recommendations from an internal advisory panel.

Analysts view it’s a step forward for a greater autonomy of the central bank. The government’s role will now be limited to approving or rejecting three independent economists nominated by the central bank’s board, they added.

The central bank, in a statement, said amendments in the SBP Act 1956 were enacted in November last and “according to which a Monetary Policy Committee (MPC) has been constituted with primary responsibility to decide about the monetary policy of the SBP.”

“A schedule of the first meeting of MPC would be announced after nomination of its members was completed,” the statement said.

Qamar said the next monetary policy will be announced in consultation with the newly-formed MPC for the first time.

According to amendments made to the SBP Act, 1956, mechanism for establishment of MPC was defined. Under the law there would be MPC, consisting of Governor SBP as chairperson; three senior executives of the bank to be nominated by the governor; three members of the board, to be nominated by the board; and three external members, who shall be economists, to be appointed by the federal government on recommendation of the board.

As per law the external members would be appointed for a period of three years and they will be eligible for a re-appointment for another term of three years.