The SBP draws its roots from the Reserve Bank of India, which was the central bank for all of the British India. Following the partition of India in 1947, the need for an independent central bank for the country was felt.
PHOTO:FILE
NORTHAMPTON: This year marked the 70th birthday of Pakistan’s one of the most important public institutions – the State Bank of Pakistan (SBP), the central bank of the country. Incidentally, it was also the UK National Health Service’s 70th birthday on July 1, 2018.
Although both institutions are in different countries, work in completely different environments and are situated in different sectors, the common thread that runs through is that both are highly respected institutions, working with diligence and honesty to serve the public.
The SBP draws its roots from the Reserve Bank of India, which was the central bank for all of the British India. Following the partition of India in 1947, the need for an independent central bank for the country was felt.
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This resulted in the legislation which led to the promulgation of the State Bank of Pakistan order on May 12, 1948 as well as the order for amendment of the Pakistan (Monetary System and Reserve Bank) Order 1947, which required the Reserve Bank of India to relinquish its role in Pakistan on June 30, 1948.
The SBP has come a long way, since its inception, to restructure the financial system and ensure its soundness and efficiency. It has also made efforts to keep itself up to date with global changes, including the invasion of technology.
Reflecting the SBP journey
However, challenges remain. Recently, a session was held to reflect the seven-decade journey of the central bank, discuss challenges that the organisation faces and has faced in the past and take note of opportunities that will come in the future.
The bank organised an insightful seminar on the occasion and invited current and former SBP governors, who shared their thoughts and candid views on their future vision for the organisation. The panellists included Dr Ishrat Husain, Dr Shamshad Akhtar, Yaseen Anwar and Ashraf Mahmood Wathra, along with present Governor Tariq Bajwa.
The panellists discussed a wide variety of topics which included macroeconomic management, financial sector and digital innovations, central bank autonomy and impact of global financial regulatory environment on Pakistan.
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Husain deliberated the need for a strong institutional framework for achieving greater financial depth and access. He also discussed some of the achievements during his governorship including the induction of highly skilled human resources and central bank automation through equipping it with technology.
Akhtar, in her views, shared that the central bank autonomy was a necessary and sufficient condition for economic growth of the country. She went on to say that it should be institutionalised by the legislative framework of the country.
Bajwa deliberated the requirements for efficient monetary and fiscal policy coordination. The governor spoke of the Monetary and Fiscal Policy Coordination Board and was of the view that although it was in place, it was not being effectively used to bring both sides to work in a common direction.
Ex-governor Anwar, who has had the experience of being a fund manager before joining the central bank, deliberated whether the institutions had the capacity to deliver on a mega infrastructure project such as the China-Pakistan Economic Corridor (CPEC).
He pointed out that the lack of capital markets for long-term funding was a major reason why local institutions were not equipped to deal with huge projects like CPEC and therefore need the support of foreign Systemically Important Financial Institutions (SIFIs).
Lastly, previous governor Wathra spoke about how we could witness a visible increase in the use of credit by deserving households and industries. The governor expressed his opinion that legislation alone would not result in financial inclusion and a sustainable and consistent economic growth was needed.
He was of the view that the country needed to unleash technology and creativity to support small-scale enterprises and entrepreneurs.
A consistent message that came across from all the panelists, who have had experience in running the helms of economic management in the country, was that good governance was a fundamental factor behind sustainable economic growth. It is only with a strong institutional framework in place that institutions would work cohesively together and meet the country’s stipulated economic goals.
The writer is a doctoral candidate at The Bartlett, UCL
Published in The Express Tribune, July 16th, 2018.
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