Monetary Policy Department (MPD), as one of the core policy related departments of State Bank of Pakistan (SBP), is responsible for providing informative and analytical support for the formulation, dissemination and implementation of the Bank’s monetary policy. Being its main function, the department dedicates its significant resources in not only preparing the Monetary Policy Statement/Decision but also in its effective dissemination. In a year, two detailed statements are four brief decisions are prepared and issued. The statements analytically evaluate the impact of past monetary policy stances on key macroeconomic variables during the past six months along with their outlook, while the decisions are restricted to brief forward-looking assessment of the economy concluded with the monetary policy decision.
MPD forecasts key macroeconomic variables such as inflation, exports and imports using various econometric techniques. It also evaluates the upside and downward risks to these forecasts. Similarly, the department also prepares the detailed projections of monetary accounts. It also 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 with the objective to explore linkages of credit with other sectors of the economy. Based on all these developments and projections, forward‐looking analytical assessment and outlooks of inflation, external trade and monetary and credit conditions are prepared.
Simultaneously financial programming based macroeconomic framework, which captures the interactions among the four major sectors of the economy – real, fiscal, external, and monetary, is also prepared incorporating the macroeconomic forecasts/outlooks prepared by the department. The department also analyzes the impact of monetary policy decisions on market conditions and provides an assessment of the likely impact of changes in macroeconomic conditions on market liquidity and interest rates. These outputs are shared with the senior management and used as an input for policy decisions.
MPD also conducts seminars for analysts and academia on the concepts, implementation and issues of monetary policy are also conducted by MPD. Department also prepares need based forecasts, scenario analyses and impact assessments for discussions and consultation with the Ministry of Finance and IMF. The department also provides consolidated data/ information, pertaining to SBP, to the IMF as per the requirements of various review missions. To identify issues and generate debate, officers of the department regularly writeanalytical notes and working papers on topics related to monetary policy, which are posted on MPD’s internal website for discussion after appropriate review process.