Governor, State Bank of Pakistan (SBP), Yaseen Anwar has disclosed that the central bank is currently at an advanced level of development of a comprehensive liquidity management solution for Islamic Banking Institutions (IBIs) following extensive efforts made both by the industry and SBP. According to a statement issued by SBP on Monday, delivering his keynote address at a two-day international conference – Oman Islamic Economic Forum – in Muscat, the governor said that this comprehensive liquidity management solution would include 1) development of Islamic interbank money market, 2) development of Islamic Interbank Offered Rate (IIBOR) for use as a benchmark for pricing of Islamic finance products, 3) transformation of a sizeable portion of conventional sovereign debt in the books of central bank into Shariah-compliant debt, 4) allowing IBIs to place surplus liquidity with the central bank to be remunerated based on the central bank’s earnings on Shariah-complaint assets and investment portfolio, and v) lender of last resort facility for IBIs. The most challenging and time consuming aspect of this mechanism is the transformation of sovereign debt into Shariah-complaint debt as it involves identification of the assets to be used for transformation, their valuation and documentation etc, he said. ‘However, I am confident that with the help and grace of Almighty Allah, we should be able to finalise this mechanism in the near future.’
