Pakistan has had a slow, erratic and unfinished process of financial modernisation, with a range of objectives, no formal targets, and instruments becoming effective and indirect only towards the end of the period. External and political factors provided repeated distraction and disruption to modernisation of the monetary framework.
| Years | Targets and attainment | Classification |
| 1974-81 | exchange rates fixed by central bank, other banks trade only at those rates; monetary policy operated largely by direct credit controls; recurring monetary financing of fiscal deficits | augmented exchange rate fix AERF |
| 1982-2023 | exchange rate more or less managed, with frequent changes, with eye initially more to competitiveness but later more to inflation control; exchange rate unified 1999, continues for many years to be largely fixed (at changing rates), but with gradual liberalisation; monetary policy operated until 1992 largely by imprecise direct credit controls, then slow and erratic shift towards indirect instruments with regular Treasury bill auctions from 1991, but interest rate corridor and clear policy rate only from 2015; monetary financing of government, directly by the central bank and later also by the commercial banks, remains important; banking system (nationalised in 1974, some privatisation from early 1990s) highly concentrated; increases in central bank independence repeatedly discussed but implementation half-hearted; frequent slippages in both stabilisation policy and structural reforms; monetary policy objectives include growth, competitiveness and inflation, but latter comes to dominate in 2010s; talk from 2015 of moving to inflation target but major reforms required first; exchange rate market-determined from May 2019, with monetary focus still on reserve money, and commitment to end fiscal dominance; plan to strengthen central bank independence; impact from and response to Covid-19, relatively small output effect; major policy slippage (mainly fiscal plus some renewed forex intervention) 2021, some attempt to get back on track 2022, but floods, political turmoil and global commodity price rises 2022-23 cause some delays | loosely structured discretion LSD |
Selected IMF references: RED 1976 pp33-6, 67-8; RED 1979 pp70-2; SR 1979 pp2-3; RED 1981 pp36-7; RED 1985 pp49-56, 82-4; RED 1988 pp55-6; RED 1989 pp63-5, 68-71; RED 1991 pp128-34; RED 1992 pp32-3; RED 1995 pp35-8; RED 1997 pp4-5, 30, 61-2; SR 2000 pp6, 17-21, 40-41; SISA 2002 ch, IV; SISA 2004 pp22-3; SR 2009 pp9, 16; SR 2012 p10; SR 2015 p12; SR 2017 pp12-13; Request under EFF… June 2019 pp14-15; 1st Review under EFF… December 2019 pp12-13; 2nd to 5th Reviews under EFF… March 2021 pp14-17; 6th Review under EFF… December 2021 pp6, 11, 17-20; 7-8th Reviews under EFF… August 2022 pp4-5, 16-20; Request for SBA…June 2023 pp4-10, 17-19, 30-1; 1st Review under SBA… December 2023 p12; 2nd Review under SBA…April 2024 pp5-7, 12.
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Monetary Policy Frameworks 