Munich Personal RePEc Archive

Yes, we need a central bank

Hanif, Muhammad Nadim (2002): Yes, we need a central bank.

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Abstract

The financial system of a country comprises entities engaged in transactions involving financial instruments in money, capital, and foreign exchange markets. This sector has strong linkages with other sectors of the economy like external, fiscal and real sectors. The apex financial institution in every country is its Central Bank and the State Bank of Pakistan functions as our Central Bank. Section 9A. 1. of the State Bank of Pakistan Act 1956 shoulders the function of securing the soundness of the financial system explicitly upon the Central Board of Directors of the Bank. Traditionally, it has been considered ideal to place banking supervision under the umbrella of Central Bank because this function is key to the conduct of monetary policy and financial stability oversight. Financial sector reforms and restructuring process started in the early 1990s. Objectives of reforms were to create a level playing field for financial institutions and markets for instilling competition, strengthening their governance and supervision, and adopting a market-based indirect system of monetary, exchange and credit management for better allocation of financial resources. Reforms covered seven important areas: financial liberalisation, institutional strengthening, domestic debt management, monetary management, banking law, foreign exchange, and capital market.

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