Proposed changes aim to modernize financial governance and introduce digital currency in Pakistan
The Pakistani federal government has unveiled proposed amendments to the State Bank of Pakistan (SBP) Act that, if approved, could mark a significant shift in the country’s financial policy. The amendments aim to allow dual nationals to hold top roles in the central bank and to establish legal groundwork for digital currency, including cryptocurrencies such as Bitcoin.
Government insiders indicate that approximately a dozen amendments, spearheaded by the finance ministry, have already passed a preliminary review by the Ministry of Law. A summary of these proposals has been submitted to the federal cabinet, signalling the government’s intent to introduce a new approach to Pakistan’s financial governance.
One of the most notable proposals seeks to overturn the restriction on dual nationals from serving as governor, deputy governors, or non-executive directors on the SBP board. This disqualification was enacted in January 2022, following a series of amendments aimed at aligning SBP governance with standards set by the International Monetary Fund (IMF). However, government sources clarified that the dual nationality restriction was not specifically recommended by the IMF but rather stemmed from preferences within SBP leadership at the time.
The proposed amendment to Section 13 of the SBP Act would allow experienced dual nationals, such as the current deputy governor Dr. Inayat Husain, who holds dual nationality, to serve in top positions without the existing disqualification. Finance Minister Muhammad Aurangzeb underscored the need for greater flexibility in eligibility for SBP leadership roles, citing a limited domestic talent pool. With two of the three deputy governor positions likely to be vacant in the near future, the government is under pressure to act on these amendments promptly to ensure continuity and expertise at the central bank.
In a groundbreaking move, the amendments also introduce a legal framework for digital currency in Pakistan. Historically, the SBP has maintained a cautious stance toward digital assets, often issuing warnings against their use in public advisories. However, the proposed amendments redefine digital currency as a legally recognized form of currency, issued and regulated by the SBP itself, thereby enabling the central bank to operate in both physical and digital realms.
The SBP is also expected to create a dedicated subsidiary focused on the development and management of digital payment systems, reflecting the government’s intent to keep pace with global financial technology advancements. Additionally, the proposed amendments outline penalties for unauthorized issuance of digital currencies, an attempt to regulate and control this emerging sector within a legal framework.
The amendments aim to strengthen SBP governance by enhancing the powers of its board, particularly in approving financial reports and providing clear procedures for convening board meetings. These provisions are designed to streamline decision-making and fortify the central bank’s role as a stabilizing force in Pakistan’s financial system.
If enacted, these changes could potentially reshape Pakistan’s financial landscape, offering new pathways for economic growth and digital innovation. Proponents argue that these amendments will attract a broader range of talent to the central bank and position Pakistan as a forward-looking player in the digital economy.
