produce high quality research based analysis for formulation
of monetary policy.
To transform the department into a highly professional and dynamic unit that provides vital support in improving the effectiveness of monetary policy and making it an exemplary model among similar departments of the central banks in emerging market economies.
Monetary Policy Department (MPD), one of the core departments of the State Bank of Pakistan, is responsible for providing intellectual, analytical, and information support for the formulation, implementation, and dissemination of monetary policy of the SBP.
The Department has three divisions. The functions, responsibilities of all three divisions are outlined below
Macroeconomic Framework and Forecasting Division
The main responsibility of this division is to prepare forecasts of key macroeconomic variables such as inflation, exports, imports, exchange rate, money demand etc to support and enhance the forward looking aspect of monetary policy formulation. Based on these forecasts the division also prepares a one-year-ahead integrated system of macroeconomic accounts using financial programming approach, thus producing consistent projections, on monthly basis, of all the four sectors – real, external, fiscal, and monetary – of the economy.
Policy Formulation Division
This division is responsible for analyzing domestic and global developments related to the formulation and implementation of monetary policy. In particular, keeping in view the SBP’s monetary policy stance, it closely monitors liquidity position in the market and related developments such as Open Market Operations (OMOs), T-bill auctions, movements in short-term interest rates, and behavior of nominal and real exchange rate.
Monetary and Credit Analysis Division
This division keeps track of major developments in various components of monetary aggregates such as government borrowings from the banking system, private sector credit, commodity operations, currency in circulation etc. The division is also responsible for coordinating with other departments of SBP to prepare extensive material for consultations with the IMF and review missions related with the recent Stand-by Arrangement (SBA). In addition, the division contributes in the quarterly working paper prepared for the Private Sector Credit Advisory Council (PSCAC) meetings and the background working paper for the quarterly meeting of the Monetary and Fiscal Policies Coordination Board (MFPCB).