Professional Documents
Culture Documents
Monetary Policy and Banking Reforms
Monetary Policy and Banking Reforms
Banking Reforms
Historical Background
Legal autonomy was guaranteed in 1994
and was further strengthened in 1997 by
amending the SBP act of 1956.
This empowered the SBP to pursue
independent monetary policy, to
regulate banking sector and to enforce
ceiling on government borrowing
Non political, non partisan and highly
professional institutions
Traditional
Primary
Secondary
Non Traditional
Promotiona
l
Developme
ntal
Traditional Functions
Monetary
Financial
External sectors stability
Responsible for payments
Objectives of Monetary
Policy
Maintaining a high and stable
employment level
Ensuring a stable exchange rate
Stimulating a stable and steady
economic growth of the economy
Sell securities, liquidity decline,
contraction of money supply
SBP
Monetary
Policy
Bank Rate
Cash
reserve
ratio
Governm
ent
securities
Continued
Money
Supply
Interest
rate
Investme
nt
Continued
Aggregate
Demand
Gross
Domestic
Product
Employment
Unemploym
ent
Continued
Ensuring better exchange rate and reserve management
policies
Development of an efficient and sound payment system
Manpower development in banking and financial sector
Quantitative and qualitative improvement of information
technology
Adoption and development of sound communication
strategy
Developing a consistent and uniform legal framework
Business process re engineering
Efficient currency management system
Features of Monetary
It can be formulated easily and
implemented more speedily
It has flexibility, no time constraint
Government abide by it until
presentation of the new budget
Free of political interferences
Monetary policy is relatively more
suitable
Case of Pakistan
Security market is small in size
and relatively underdeveloped
Discount rate/Bank rate policy is
widely used
Discount rate/ Bank rate
increase. Inflation could be
curtailed
Continued
Monetary + Fiscal policy is used to
curtail inflation in country
Inflation = Revenues will be decline
(Taxation cannot be imposed so
acquires loans)
Fiscal Policy = Reduce expenditure &
Budget
deficit