Over the last three decades, the landmark transformation of
central banks from secrecy to openness and transparency has
significantly enhanced their performance to successfully anchor
inflation expectations and achieve price stability. The extent of such a
transformation of the State Bank of Pakistan (SBP), especially in terms
of statutory objectives, monetary policy mandate, conflicts of interest,
disclosures, and dissemination of effective public economic information
is assessed vis-à-vis the current popular central banking practices. The
assessment indicates that the SBP is yet to be transformed to be able to
achieve price stability which is a cornerstone for the achievement of
sustainable economic growth. On the statutory front, such a
transformation requires amending the SBP Act 1956, in line with the
statutes for the best monetary policy frameworks by; (1) making price
stability as the overriding objective of the SBP; (2) putting in place a
clear mechanism for its accountability against price stability,
consistent inflation targets, and; (3) elimination of the cushion for
government‘s involvement with the monetary policy decision making
processes. Some of the other areas like, institutional capacity building
of the SBP, in terms of the relevance and level of the academic
qualification, research profiles, and experiences of the Board, higher
as well as lower tier management need special attention. Such
transformations may not only enhance assimilation, creation, sharing,
and funnelling of existing as well as new knowledge into monetary policy
formulation, but may help change the static mindset at the SBP, hence
allowing the institution to flourish. JEL Classification: E5, E52, E58
Keywords: Statutory Objectives, Conflicts of Interest, Disclosures,
SBP
