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Government, SBP coordination is a must - Newspaper

Downward exchange rate adjustments made by the SBP too independently create many problems. File The federal government accumulated about Rs1.5 trillion worth of fresh domestic debt in the first eight months of this fiscal year. The stock of debt swelled from Rs23.28tr in June 2020 to Rs24.78tr in February. Whenever the government adopts an expansionary fiscal policy meaning it spends more than its revenue collection to boost the economy and create jobs it resorts to additional borrowing. And, domestic borrowing comes handy particularly from commercial banks. But excessive government borrowing from banks crowds out the private sector. Depending upon the extent of this crowding out, the private sector’s contribution towards economic growth and job creation could be smaller than required. And, that frustrates the very objective of an expansionary fiscal policy. Just how badly the private sector is being crowded out can be gauged from the fact that its fresh net borrowing fro

Central bank independence: consequences for economy

Central bank independence: consequences for economy SBP has enough autonomy as compared with many other central banks including in India and Malaysia Earlier, the State Bank of Pakistan (SBP) had cut the benchmark interest rate by an aggressive 625 basis points during March-June 2020 to the current 7%. PHOTO: FILE ISLAMABAD: The federal cabinet has approved the SBP Amendment Bill 2021 without a debate. The bill has been placed in parliament for approval and seeks absolute autonomy for the State Bank of Pakistan (SBP) under the International Monetary Fund (IMF) loan conditions. There has been a heated debate on giving further autonomy to the SBP since it has been seen as an attempt to hand over financial control of the country from the government of Pakistan to the IMF.

State Bank: checks and balances in place

Proposed amendments will not scrap parliamentary oversight over central bank State Bank of Pakistan. PHOTO: FILE ISLAMABAD: The proposed amendments to the State Bank of Pakistan (SBP) Act have generated a lot of criticism. Broadly, the criticism focuses on two things: one, the amendments are being allegedly pushed through at the behest of the International Monetary Fund (IMF), which, as the argument goes, should be a sufficient reason for setting them aside. Two, the proposed changes, if carried through, will spell disaster for Pakistan’s economy, inter alia, by giving untrammeled powers to the central bank. The central bank’s working has hitherto been governed by the SBP Act, 1956 as amended from time to time.

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