Exchange rate management and balance of payments

The State Bank is responsible for maintaining the exchange rate of the rupee at an appropriate level and protecting it from any major fluctuations so that our exports remain competitive and the exchange rate stable. To achieve this goal, various exchange policies were adopted from time to time depending on the circumstances. Until 1971, the Pakistani rupee was pegged to the pound sterling, since then it has been pegged to the US dollar. However, later it was decided to adopt the current exchange rate system, which was implemented from January 8, 1982. Under this system, the value of the rupee was determined on a daily basis against a set of currencies of Pakistan's major trading partners and competitors. Its value was modified according to the need of the situation. In time, an important development took place when Pakistan accepted the obligations under Articles 2, 3 and 4 of Article VIII of the IMF Articles of Agreement.

In 1998, after the nuclear explosions, Pakistan introduced a two-tier exchange rate system on July 22, 1998, with the aim of reducing the pressure on the government's foreign exchange reserves and the economy of the sanctions imposed on Pakistan. Adverse effects should be minimized to some extent. However, since May 19, 1998, the market-based floating exchange rate system has brought the exchange rate back to a single level. Under this system, the exchange rate is determined on the basis of supply and demand in the market exchange. Foreign exchange receipts from exports and services were earlier remitted to the State Bank through authorized dealers, but now commercial banks and other authorized dealers are free to hold and transact foreign currencies.

As the custodian of foreign exchange reserves of the country, State Bank is also responsible for the management of these reserves. This is done by an Investment Committee, which takes into account the overall level of reserves, maturity and repayment requirements to decide the investment of surplus funds in a manner that ensures liquidity of funds as well as income. Can be increased. The same deposits are also used for actions in the exchange market. For this purpose, a foreign exchange dealing room has been established at the head office of Bank Daulat Pakistan and a foreign exchange expert has been hired.

Evolving role of State Bank

The Evolving Role of the State Bank The responsibilities of a central bank in a developing country go far beyond the general duties of managing monetary policy to achieve broad economic objectives. This role includes not only the formation of important components of money and capital markets, but also support in the process of economic development of the country is part of this role to promote the full utilization of the country's resources.

Ever since its inception, Bank Daulat Pakistan has been playing an active developmental role for achieving overall economic objectives, apart from fulfilling its traditional stipend of monetary and credit regulation. The central bank's clear understanding of its development role is actually a result of its desire to reframe all policies for the purpose of rapid economic growth. Therefore, the State Bank has given place to the traditional responsibilities of the central bank as well as the development role.

Under the State Bank of Pakistan Act, 1956, the scope of the bank's activities has been greatly expanded by including the objective of economic growth in the bank's law. There are many forms of bank participation in the development process, for example, revitalization of the banking system in Pakistan, establishment of new financial institutions and preparation of new credit instruments for promotion of financial intermediation, establishment of development financial institutions, according to selected development priorities. Guidance in utilization of credit, provision of subsidized loans, and formation of market capital.