Finance Minister Shaukat Tarin has dismissed fears that the central bank will go rogue if the State Bank of Pakistan (SBP) Amendment Act, 2021, is passed.
The amendment bill seeks to dissolve the Monetary and Fiscal Policies Co-ordination Board, curtailing the Finance Ministry’s power over the SBP governor to a large extent. The bill also proposes to create an Executive Committee in SBP that will have the ultimate authority over day-to-day operations of the central bank.
Over the past week, Tarin has maintained that the government is only giving administrative independence to the SBP while the supreme authority would be in the hand of the non-executive board that will be nominated and approved by the government itself.
In an exclusive interview with Profit Magazine Publishing Editor Babar Nizami, Tarin said, “If the board members are appointed judiciously by the government itself then such an incident will never occur.”
The finance minister said that the worst case scenario that could happen would be if the State Bank does not play its role in accordance with the government’s economic policy guidelines or objectives. However, he assured that the central bank becoming an obstacle in this regard was unlikely to happen in his opinion.
Tarin also advocated for the SBP’s administrative independence. “Its [SBP’s] independence is imperative; I would support the same stance even if I was in the opposition,” he said.
Speaking about extending the SBP governor’s tenure from three to five years, one of the topics that has been continuously disagreed on between the federal government and the opposition, Tarin said that it was a non-issue and rather a simple logical step to make the SPB’s functioning more effective.
“Three years are not enough for successful execution of strategies devised by the head of an organisation. Jobs of this nature, of senior posts in any important organisation, require at least five years to make fruitful changes,” he said.
Asked specifically about the IMF’s control over Pakistan, through the SBP governor, even after the $6 billion loan programme comes to an expected end next year given the coinciding of the Fund’s loan programme and the incumbent SBP governor’s appointment, Tarin brushed off such fears saying that “conspiracy theories were a norm in Pakistan.”
“These are all conspiracy theories and should be ignored,” he said, recalling that he had been subjected to the same kind of suspicion when he had first joined the government after serving at Citibank.
It may be recalled that while presenting the bill in the National Assembly (NA) earlier this week, the finance minister had said that the government can end SBP’s sovereignty by a simple majority in the parliament if it ever feels that it [the bank] is slipping out of hands.
“The Pakistan Tehreek-e-Insaf (PTI) does not only want to strengthen, but also give freedom and authority to institutions that will not be strong unless they are empowered,” he had explained.
Replying to a question by Babar Nizami on whether things could come to this point, Tarin repeated the PTI’s agenda of giving autonomy to institutions. “Everything will remain under control as long as the management does not become rebellious. However, if such an extreme situation does take place then, yes, since this change is not a part of the constitution, the parliament has the power to restore normality.”
