ISLAMABAD: The government has given an undertaking to the International Monetary Fund (IMF) to give complete independence to the State Bank of Pakistan (SBP) by amending the relevant laws and also to introduce a second round of ‘adjustments’ in electricity tariff this month.

“The authorities have agreed to enact amendments to the SBP law — incorporating the recommendations of the recent IMF safeguards assessment — to strengthen the autonomy of the SBP as structural benchmark,” an IMF statement issued on Friday said.

It said the progress on the IMF programme was satisfactory but any complacency on part of the government could risk growth momentum and international confidence.

The law will provide full operational independence and provide enhanced governance structure, including strong internal controls. In particular, the amendments will establish an independent, decision-making monetary policy committee to design and implement monetary policy.

In line with findings of a recent safeguard assessment mission, “the amendments would also provide authority to the SBP as the sole owner and manager of foreign exchange reserves, establish an executive board with defined executive powers and remove government representative from the Central Board,” it said.

The amendments will remove provisions that give government authority to direct certain SBP activities. They will strengthen personal autonomy of board members and financial autonomy of the SBP.

The draft law has reportedly been submitted to the IMF for review and comments.

Under the proposal, the SBP will establish a board committee to centralise and oversee risk management activities by end-January.

The SBP will also approve by end-March a plan to fully implement International Financial Reporting Standards, beginning with the current fiscal year’s financial statements, including reporting financial reserves by currency and maturity.

The IMF has asked the government to re-evaluate minimum capital requirement ratios of the banking sector, terming them higher by international standards. The SBP is preparing a time-bound action plan to address minimum capital adequacy issues with a few problem banks. It has already identified the capital shortfall in one state-owned and three private banks, representing around 6.6 per cent of the banking sector assets.

The statement says that in the energy sector, in addition to fuel adjustment the government has pledged to strengthen the tariff determination mechanism, with Nepra expected to issue a new determined tariff that would be passed on to consumers this month.