lender of last resort functions as well as a framework for dealing with failing banks. to achieve these goals, sbp is in process of putting together a comprehensive reform program. sbp has developed and has full ownership of this reform agenda and received technical assistance from the international monetary fund, the asian development bank and the dfid of united kingdom to draw from international experience and expertise. central bank governance principal driving factor for the formulation and implementation reform is the autonomy and competence of the organization. over the years, emerging evidence has confirmed the significant benefits of central bank autonomy ( not just de jure autonomy but de facto autonomy too ) for macroeconomic performance as central banks play a primary role in price stability, while also ensuring financial stability. this role has been supported by assigning requisite powers to central banks not only in monetary policy formulation, conduct and implementation but in effective enforcement of fiscal discipline. this has been achieved in several jurisdictions without any real additional costs or sacrifices in terms of output volatility or reduced economic growth. further, central banks in number of jurisdictions have performed the role of regulator of the full or part of the financial system. the recent financial market turmoil has also brought under scrutiny the models and governance structures of central banks / financial regulators, while bringing to forefront the risks of leaving nonbank financial ( nbf ) sector virtually unattended. in absence of proper regulatory and supervisory oversight, the nbf sector ’ s overleveraging of the financial systems has exposed the global financial system to multiple risks. as defaults emerged the financial institutions lacked ability to service obligations. this episode has generated unprecedented liquidity crisis and bank losses whose undervaluation / closures / liquidation impacted the financial markets at large. rescue operations and economy wide and household losses have not only impacted advanced countries but taken a toll on global financial system and send warning signals on need for change in financial regulatory architecture and its landscape. these attributes of central banks helps cushion the impact of political cycles on economic cycles. sbp over the years has acquired not only the required autonomy to steer the monetary policy and financial stability mandates, but has regulated and supervised well the banking sector reforms. notwithstanding, sbp set up under the state bank of pakistan act, 1956 has been amended occasionally to strengthen its powers and mandate but now it needs to be modernized in line with the international best practices. the key issues with sbp act are that ( i ) it contains outdated provisions that have lost their validity in light of the administrative and structural

to meet any balance of payments difficulty and short - term liquidity needs. rbi has offered the facility which is available to all member countries in specific conditions. under the facility, the requesting member countries can make withdrawals in us dollar, euro or indian rupee in multiple tranches. so far, bhutan and sri lanka have availed the aforesaid facility. this kind of agreement also helped promoting economic cooperation between member countries, besides providing them a back - stop arrangement to meet their balance of payments difficulties and short - term liquidity needs arising from market turbulence. 13. now, turning to our objective on forging closer ties in macroeconomic policies, the progress has been slower. in my humble opinion, this i think is one area in which much more can be done given the nature of our common shocks, configuration of our economies and our cultural ties. this however, will require inter and intra agency collaborations, which is why this is so challenging. nevertheless, let me highlight three ways in which we think we have made progress to meet this objective. 14. first, the governors ’ symposium, which happens on the sidelines of the regional group meeting, has been playing an important role in terms of discussing and comparing solutions to common economic issues chosen by the governors. for example, the latest symposium showed the stark differences on our approaches to microfinance and the regulations of this sector. second, it is becoming a tradition to complement the regional group meetings with a lecture by an eminent personality. the first of these lectures was organized in islamabad ’ s group meeting in june 2013 and delivered by prof. ha - joon chang, while the second one was recently organized in dhaka and delivered by the governor rbi, raguram rajan. this is an encourageable development since it helps policymakers at the highest level to debate grand issues and policy designs. third, the saarcfinance network initiated a meeting of senior economists to discuss economic conjecture of member countries. the idea is to share and compare notes on economic policy experiences, albeit informally and at an executive level. the first of these meetings were held in islamabad in june 2013, which could also be followed by member central banks. 15. although, these three steps represent ways in which important economic issues of common interest are debated, they fall short of economic policy coordination within the member countries. we hope that the new collaborative research programme will mature and also help policy makers to start discussing and evaluating the possibilities of coordinating policies on the basis of evidence -