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According to the State Bank of Pakistan Act 1956 the scope of the Bank operations was
considerably widened, which require the Bank to
In February 1994, the state bank of Pakistan was granted autonomy. In 1997 this autonomy
further strengthened by issuing three Amendment Ordinance (approved by Parliament in May
1997) namely,
Due to this change in the State Bank Act, it gave the bank the full and exclusive (Limited)
authority
1. Traditional and
2. developmental functions to achieve macro-economic goals
Traditional functions, which performed by the central bank almost all over the world, may be
classified into two groups:
The Nontraditional or Promotional functions that are performed by the SBP include
The SBP also has been playing an active part in the process of islamization of the banking
system.
Regulation of Liquidity
As a central bank of Pakistan, SBP has been entrusted with the responsibility to
I. The maintenance of monetary stability ( leading towards the stability in the domestic
price)
II. Promotion of economic growth
To regulate the quantity and direction of flow of credit to different uses and sectors, the State
Bank of Pakistan makes use of both direct and indirect instrument (tools) of monetary
management.
Exchange Rate Management and Balance of payment
1. Maintenance of external value of the currency is a major responsibility of SBP. For this
purpose the SBP required to regulate the foreign exchange reserves of Pakistan in line
with the Condition (stipulation) of the Foreign Exchange Act 1947.
2. As an agent to the Govt, SBP have authority to purchase and sale gold, silver or approved
foreign exchange and transaction of Special Rights with IMF under sub-sections of State
bank of Pakistan Act, 1956.
3. The Bank is responsible ;
To keep the exchange rate of the rupee at an appropriate level
To prevent it from wide fluctuations in order maintain competitiveness of our exports
Maintain the stability in the foreign exchange market
Various policies have been adopted from time to time in view the prevailing (existing)
circumstances (condition).
Pakistan rupee remained linked to pound sterling till September 1971 and subsequent (later)
to U.S. Dollar
In 1982 January 8, the value of the rupee was determined on daily basis which reference to a
basket of currencies of Pakistan major trading partners and competitors.
A two tier exchange rate system was introduced to reduce the pressure on official reserves
To prevent the economy to some extent from adverse implications of the sanction (limits)
imposed on Pakistan.
However the exchange rate has been unified (merge) with the introduction of market based
daily exchange rate system, under which the exchange rate is determined by the demand and
supply position in the foreign exchange market.
SBP is also responsible for the management of the foreign exchange reserves and this
task is performed by an Investment Committee.
This committee after taking into consideration the overall level of reserves,
Maturities
Payment obligations
Take decisions to make investment of surplus funds in such a manner that ensure the
liquidity of funds and maximize the earning. These reserves are also being used for
intervention in the foreign exchange market.
DEFINITION of 'Unencumbered'
An asset or property that is free and clear of any encumbrances such as creditor claims or liens. An
unencumbered asset is much easier to sell or transfer than one with an encumbrance. Examples of
typical unencumbered assets are a house without any mortgage or other lien on it, a car where the
automobile loan has been paid off or stocks purchased in a cash account, rather than a margin
account.