The State Bank of Pakistan (SBP) Amendment Act 2021 is a continuation of the process to modernize the central bank. The Act defines domestic price stability as the primary objective of the central bank. The secondary objective has been envisaged as financial stability. It is not the first time that a change is being proposed in the SBP Act of 1956. Previous governments have amended the SBP Act of 1956 four times to stay relevant to a changing domestic and external landscape: in 1994, 1997, 2012 and 2015.
The approval of SBP’s Amendment Act was among the prior actions for completion of the sixth review and release of a $1 billion tranche under the $6 billion Extended Fund Facility (EFF) of the IMF programme. The IMF is the lender of last resort. Its approval ensures access to a host of multilateral and other international financing options at cheaper mark-up. IMF’s continuity can remove uncertainty and help Pakistan finance the short term.