National Assembly approves Lending limitations to government from the Central Bank – Alfalah Securities Limited

Karachi: The National Assembly on Wednesday approved the “State Bank of Pakistan Amendment Bill 2011” designed to make it mandatory for the government to retire borrowing from the central bank at the end of each quarter and introduce a statutory committee to facilitate Bank’s autonomy.

According to Alfalah Securities Limited, additionally, the debt of the federal government, which it owes to the Central Bank as on April 30, 2011, would be retired not later than eight years from that date. Failing to meet the afore-stated limitations, the Finance Minister would be required to place before the Parliament a statement giving justifications.

The Monetary and Fiscal Policies Co-ordination Board is also proposed to be replaced with the current Monetary Policy Committee with having a statutory status, wherein external experts would be appointed by the federal government. The Central Board will be represented by two members on the Committee which will be responsible to formulate, decide and implement the monetary policy and decide on matters such as those relating to key interest rates, supply of reserves, exchange rate policy, and the limits and nature of advances and loans to the government.

It is yet to be seen whether the government would accept the proposal of appointing external experts for policy making or not. It seems that the government intends to take steps in the direction of mending economic loopholes as stipulated by the IMF in its report which would facilitate the government to resume foreign funding from donor agencies.