Pakistan and the International Monetary Fund (IMF) have reached a staff-level agreement, paving the way for disbursement of second tranche of US$ 700 million, subject to approval of IMF’s Executive Board, as part of the ongoing US$3 billion 9-month Standby Arrangement (SBA). The forthcoming disbursement will have a positive impact on country’s current economic situation. In a parallel development, the State Bank of Pakistan (SBP) has unveiled its strategic vision 2028, outlining six key objectives. These encompass control of inflation, enhancement of efficiency, effectiveness, promotion of fairness and stability within the financial system. The five-year plan [SBP Vision 2028] emphasizes inclusiveness and sustainable access to financial services, transition to a Shariah-compliant banking system, establishment of a digital financial services ecosystem, and transformation of SBP into a technologically advanced, people-centric organization.
SBP Vision 2028 underscores the achievements outlined in its Vision 2020, highlighting progress in enhancing the effectiveness of monetary policy. Noteworthy developments include the establishment of an independent Monetary Policy Committee (MPC) to bolster independence and quality of monetary policy decisions.
For addressing inflationary concerns, government borrowings from SBP were discontinued. Additionally, a market-based exchange rate regime has been adopted, accompanied by introduction of a reformed interest rate corridor framework. These measures aim to ensure effective implementation of the monetary policy stance. In efforts to fortify financial stability framework, SBP has set up Financial Stability Department (FSD). At the national level, creation of National Financial Stability Council (NFSC) brings together Ministry of Finance (MoF), SBP, and Securities and Exchange Commission of Pakistan (SECP) as a comprehensive financial stability forum.
Augmenting financial stability regime, Deposit Protection Corporation (DPC) is established, providing safeguard for small depositors in the event of bank failure. In response to interim liquidity pressures, a lender of last resort (LOLR) facility has been instituted as an emergency liquidity assistance tool for banks. Acknowledging the risks posed by financial conglomerates, SBP and SECP have jointly formed a dedicated task force. Furthermore, a Shariah-compliant LOLR facility has been developed for Islamic banking institutions. Aligning with Basel Committee on Banking Supervision (BCBS) guidelines, a regulatory/supervisory framework for domestic systemically important banks (D-SIBs) in Pakistan has also been introduced.
Under SBP Vision 2020, a roadmap for the banking industry’s efficiency (2025) was developed, including a digital on-board framework for remote account opening by residents. SBP also introduced a separate regulatory framework for digital banks and streamlined foreign exchange transactions through technology-based regulatory approvals.
Under SBP Vision 2020, efforts were made to address gender disparities in financial sector that included the launch of Banking on Equality (BoE) Policy. Initiatives like SME Asaan Finance (SAAF) Scheme provided collateral-free financing for small and medium enterprises (SMEs), while Asaan Mobile Accounts (AMA) facilitated digital account opening for low-income segment without internet access. Licensing two private credit bureaus is aimed to enhance credit history availability. Similarly, Islamic banking assets reached 15.3 percent by June 2020, prompting issuance of the third strategic plan (FY2021-25) and establishment of Centers of Excellence in Islamic Finance Education (CEIFEs) for industry promotion and capacity building.
Additionally, under SBP Vision 2020, the development of a robust payment system was a key goal. This included implementation of Micro Payment Gateway (Raast), propelling Pakistan into countries with Instant Payment System (IPS). The Roshan Digital Account (RDA) framework allowed overseas Pakistanis to open and operate digital bank accounts. SBP also introduced regulations for Electronic Money Institutions (EMIs) to facilitate non-banking entities entering the payment system landscape. Additionally, QR code standards were issued to ensure interoperability and encourage digital retail payments.
In conformity with Vision 2020, initiatives were taken to enhance institutional capacity, focusing on human resource (HR) skillsets, information technology (IT) system robustness, and risk management. The Knowledge Management (KM) system roll-out is aimed at making SBP a paperless digital organization for improved efficiency. Measures were also taken to improve workplace environment, achieve gender balance, and enforce a zero-tolerance policy against sexual harassment.
The new SBP Vision 2028, has outlined five crucial themes—Strategic Communication, Climate Change, Technological Innovation, Diversity and Inclusion, and Productivity and Competitiveness—to reshape the trajectory of banking and economy in the face of global challenges. Under the specific theme of “Strategic Communication”, SBP aims to prioritize purposeful communication to advance its mission, fostering transparency, trust, effective decision-making, and collaboration. This strategic approach is geared towards meeting challenges, aligning with global standards, enhancing stakeholder understanding, building trust, managing expectations, and promoting efficiency ideas through the sharing of success stories.
SBP acknowledges importance of climate change rating Pakistan among top 10 countries severely affected by it, experiencing torrential rains, glacier melting, floods, and heat waves. These negatively impact livelihoods, crops, infrastructure, communication networks, energy, and food security, exacerbated by weak governance and inadequate social support leading to restlessness. With a global shift towards clean energy and zero emissions, climate change adaptation is crucial for sustainable growth across all sectors. In line with this vision, the financial regulator aims to focus on proactive policy measures, reducing climate-associated risks through enhanced regulatory frameworks, promoting resource allocation for a sustainable, dynamic and green economy, improving infrastructure by increasing access to finance and advocating sustainable finance to tackle challenges related to food and water crises.
In its forthcoming strategic plan (2023-2028), SBP aims to prioritize adoption of digital banking and payments, with specific emphasis on cybersecurity. The plan also involves expanding and integrating data with internal and external stakeholders to reduce informal economy’s scope. Additionally, it includes exploring various facets of digital currencies and implementing technology-driven regulations and supervision. SBP Vision 2028 seeks to capitalize on emerging technologies for resource optimization, process automation, risk management, value delivery, and operational efficiency. It also entails providing a sandbox environment for stakeholders to experiment with and test innovative ideas.
As a regulatory body, SBP actively champions diversity and inclusion, exemplified by initiatives such as BoE Policy, focusing on narrowing gender gap in financial inclusion and cultivating women-friendly practices within the financial sector. While promoting gender equality is commendable, there is an urgent need to introduce a minorities’ specific programme, with special quota. This would enable them to ascend from officer roles to executive positions in SBP. Similar directives should be issued to both banking and non-banking financial institutions for implementation of quotas for minorities allowing them to contribute towards the country’s progress. Implementing this initiative will genuinely demonstrate a commitment to the principles of diversity and inclusion.
SBP fostered productivity and competitiveness in response to global economic changes is aimed at improving teamwork with key partners to boost private sector credit and increase access to finance for underserved groups, implementing regulations to minimize risks and ensure smooth market operations, promoting innovative product development by financial institutions through technology and skill-building, analyzing and identifying new opportunities to strengthen the financial system.
SBP Vision 2028 is tailored to meet future challenges and harmonize our financial system with global practices. However, the objective of ensuring price stability and controlling inflation might be misplaced, given that dependence on traditional monetary tools could prove insufficient in complex economic conditions, where global factors can impact domestic inflation. Striking a balance between managing inflation and addressing broader economic objectives remains a persistent challenge for central banks.
Furthermore, with adoption of market-determined exchange rate, our currency is experiencing continuous decline, influenced by speculators and illicit actors. Despite ongoing efforts to stabilize prices through stringent actions against those engaged in unlawful activities. However, sustainability of these stringent measures is questionable, where the market is tightly controlled, and people are targeted solely based on possessing foreign currency. The day, control by agencies is relaxed, we will confront rupee decline. The best option is to frame business friendly regulatory measures and controls, where all are given equal rights to do business according to their expertise thus contributing to economic growth.
The recent reform initiatives of SBP to oversee exchange companies and categorize them have not only eradicated small businesses but also created a monopoly, which raises concerns about fair business practices. Moreover, advocating market-determined exchange rate exposes economies to abrupt and unpredictable shocks, posing challenges for businesses in planning and operating with certainty not only hampers economic growth but also dissuades foreign investors for lack of certainty.
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Dr. Ikramul Haq, Advocate Supreme Court, specialises in constitutional, corporate, media, ML/CFT related laws, IT, intellectual property, arbitration and international tax laws. He was full-time journalist from 1979 to 1984 with Viewpoint and Dawn. He served Civil Services of Pakistan from 1984 to 1996. He established Huzaima & Ikram in 1996 and is presently its chief partner as well as partner in Huzaima Ikram & Ijaz. He studied journalism, English literature and law. He is Chief Editor of Taxation. He is country editor and correspondent of International Bureau of Fiscal Documentation (IBFD) and member of International Fiscal Association (IFA). He is Visiting Faculty at Lahore University of Management Sciences (LUMS) and member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE).
He has coauthored with Huzaima Bukhari many books that include Tax Reforms in Pakistan: Historic & Critical Review, Towards Flat, Low-rate, Broad and Predictable Taxes (revised & Expanded Edition, Pakistan: Enigma of Taxation, Towards Flat, Low-rate, Broad and Predictable Taxes (revised/enlarged edition of December 2020), Law & Practice of Income Tax, Law , Practice of Sales Tax, Law and Practice of Corporate Law, Law & Practice of Federal Excise, Law & Practice of Sales Tax on Services, Federal Tax Laws of Pakistan, Provincial Tax Laws, Practical Handbook of Income Tax, Tax Laws of Pakistan, Principles of Income Tax with Glossary and Master Tax Guide, Income Tax Digest 1886-2011 (with judicial analysis).
He is author of Commentary on Avoidance of Double Taxation Agreements signed by Pakistan, Pakistan: From Hash to Heroin, its sequel Pakistan: Drug-trap to Debt-trap and Practical Handbook of Income Tax. Two books of poetry are Phull Kikkaran De (Punjabi 2023) and Nai Ufaq (Urdu 1979 with Siraj Munir and Shahid Jamal).
The recent publication, coauthored with Abdul Rauf Shakoori is Pakistan Tackling FATF: Challenges & Solutions
available at:
https://www.amazon.com/dp/B08RXH8W46 and
https://aacp.com.pk/product/pakistan-tackling-fatf-challenges-solutions/
He regularly writes columns/article/papers for many Pakistani newspapers and international journals and has contributed over 2500 articles on a variety of issues of public interest, printed in various journals, magazines and newspapers at home and abroad.
Twitter: DrIkramulHaq
Abdul Rauf Shakoori, Advocate High Court, is a subject-matter expert on AML-CFT, Compliance, Cyber Crime and Risk Management. He has been providing AML-CFT advisory and training services to financial institutions (banks, DNFBPs, Investment companies, Money Service Businesses, insurance companies and securities), government institutions including law enforcement agencies located in North America (USA & CANADA), Middle East and Pakistan. His areas of expertise include legal, strategic planning, cross border transactions including but not limited to joint ventures (JVs), mergers & acquisitions (M&A), takeovers, privatizations, overseas expansions, USA Patriot Act, Banking Secrecy Act, Office of Foreign Assets Control (OFAC).
Over his career he has demonstrated excellent leadership, communication, analytical, and problem-solving skills and have also developed and delivered training courses in the areas of AML/CFT, Compliance, Fraud & Financial Crime Risk Management, Bank Secrecy, Cyber Crimes & Internet Threats against Banks, E–Channels Fraud Prevention, Security and Investigation of Financial Crimes. The courses have been delivered as practical workshops with case study driven scenarios and exams to insure knowledge transfer.
His notable publications are: Rauf’s Compilation of Corporate Laws of Pakistan, Rauf’s Company Law and Practice of Pakistan and Rauf’s Research on Labour Laws and Income Tax and others.
His articles include: Revenue collection: Contemporary targets vs. orthodox approach, It is time to say goodbye to our past, US double standards, Was Due Process Flouted While Convicting Nawaz Sharif?, FATF and unjustly grey listed Pakistan, Corruption is no excuse for Incompetence, Next step for Pakistan, Pakistan’s compliance with FATF mandates, a work in progress, Pakistan’s strategy to address FATF Mandates was Inadequate, Pakistan’s Evolving FATF Compliance, Transparency Curtails Corruption, Pakistan’s Long Road towards FATF Compliance, Pakistan’s Archaic Approach to Addressing FATF Mandates, FATF: Challenges for June deadline, Pakistan: Combating the illicit flow of money, Regulating Crypto: An uphill task for Pakistan. Pakistan’s economy – Chicanery of numbers. Pakistan: Reclaiming its space on FATF whitelist. Sacred Games: Kulbhushan Jadhav Case. National FATF secretariat and Financial Monitoring Unit. The FATF challenge. Pakistan: Crucial FATF hearing. Pakistan: Dissecting FATF Failure, Environmental crimes: An emerging challenge, Countering corrupt practices .
Twitter: Adbul Rauf Shakoori
The recent publication, coauthored by these writes with Huzaima Bukhari, is Pakistan Tackling FATF: Challenges & Solutions, available at: https://www.amazon.com/dp/B08RXH8W46 and https://aacp.com.pk/
