SATURDAY MAY 21: No MPC input over Monetary Policy decision

KARACHI: After a gap of one-and-half years, the Board of Directors of the State Bank of Pakistan will deliberate and take the decision on the policy rate, without recommendations of Monetary Policy Committee (MPC), as MPC meeting is not being held this time, it is learnt. SBP is going to announce today the monetary policy for the next two months, in which economics expect no change.
According to sources, in September 2009, with the aim to further make transparent and rationalise the monetary policy process the State Bank had decided to constitute an independent MPC comprising SBP Board members and private sector representatives. To harmonise the constitution of MPC with the legal framework of SBP and make it fully independent, amendments in the SBP Act were submitted to national assembly for the legislative process and it was decided that until enactment, the MPC will seek approval of its recommendations from the Board of Directors of the SBP.
The Central Board of Directors of the SBP finalised the composition of this committee in its meeting on September 30, 2009 and nine-member committee started its deliberations in November 2009. Since then, the Board of Directors of SBP was taking decision in the light of recommendations submitted by MPC, which used to commence its deliberations just before SBP Board meeting.
Sources said that although the national assembly has approved amendment in the SBP Act, the senate has turned down the MPC proposal. Accordingly, the SBP has stopped MPC committee meeting from further working, and this time MPC meeting is not being held, they said, adding that the board of SBP would deliberate and take decision for the new monetary policy.
During the last one and half year for the first time MPC meeting is not being commenced and it seems that MPC has been demolished, sources said. In addition to the Governor of the SBP, Syed Salim Raza, and Deputy Governor, Yaseen Anwar, three SBP executives - Riaz Riazuddin (economic adviser), Asad Qureshi (executive director, financial markets and reserve management), and Hamza Ali Malik (director, monetary policy department) were the internal members of nine members monetary policy committee. The Board of Directors of the SBP was being represented by Mirza Qamar Beg and Tariq Sayeed Saigol.
In addition, Dr Hafiz Pasha and Dr Ijaz Nabi were external members of committee. Sources said that some businessman are also on SBP board, which are unable to deliberate on the monetary policy issue like Hafeez Pasha and Dr Ijaz Nabhi. Therefore, it is likely that a subcommittee will be soon constituted by SBP for monetary policy recommendations.