Finance committee approves SBP amendment bill

Govt resolves to cut SBP’s powers through legislation if central bank tries to act independently 

The Finance and Revenue Committee of the National Assembly Monday approved the State Bank of Pakistan (SBP) Amendment Act, 2021, with the government resolving to amend the law if the central bank tries to go rogue.

The meeting of the committee was held under the chairmanship of Faizullah Kamoka. In the briefing to the committee members, Finance Minister Shaukat Tarin emphasised that the government will keep control over the central bank and in case the SBP plans to go rogue, the government has the option to reverse its powers with a simple majority of the parliament. 

“The prime minister is also very clear that if they do not listen to us, we will change the law,” said Tarin. The finance minister said that the federal government will nominate the board of directors of the State Bank. 

Tarin underscored that the previous governments had borrowed Rs7 trillion from SBP whereas the Pakistan Tehreek-e-Insaf (PTI) government had not borrowed a single penny from the central bank in the last two and a half years. 

“The federal government cannot borrow from the central bank,” Tarin stated. The minister said that his team had accepted some very tough conditions of the International Monetary Fund (IMF) in March 2021, but now they have revised the SBP amendment bill.

In response to the briefing on the amendment bill, committee member Ali Pervaiz said that the government had proposed to give unlimited powers to the SBP governor, advising that the secretary of finance should have the right to vote. He further advised the government to not give the powers of the finance minister to the central bank governor.

Ahsan Iqbal, one of the members of the committee, also voiced concerns and said that the powers of appointment of governor and deputy governor should rest with the government. He emphasised that the government should have powers to make negotiations without the central bank. 

Iqbal also requested the government to keep the central bank as a lender other than private banks.

Responding to the concerns of the committee members, the finance minister said that they have not given absolute powers to SBP and the federal government will still appoint the deputy governor. He further added that the federal government has the power to remove the governor, while the board of the bank will decide how much profit it can keep. 

“We are doing this because we are in the IMF programme,” the finance minister stated. 

SBP Governor Raza Baqir, addressing the concerns of the committee, stated that he was not the first governor who had worked for the IMF, and that he did not hold any foreign nationality or permanent residency.

Baqir also said that the perception was wrong that he was making decisions on the instruction of the IMF, further adding that it was absolutely incorrect to say that one organisation was being sold to another international organisation. He informed the committee that the State Bank had earlier provided the economic review in quarterly reports but will now give detailed reports to parliament. 

While talking to the media after the meeting, Finance Minister Shaukat Tarin said that the IMF Executive Board meeting will be held on January 28 or 31.

“I had requested the IMF to postpone consideration of the 6th review of the Pakistan economy in the board meeting,” Tarin stated, adding that the government was trying to get the bills approved from the parliament as soon as possible.

The finance minister further assured that the IMF will only be approached with the bills approved by the parliament. 

FM Tarin also said that Pakistan will not negotiate with the IMF again on the sixth review of the loan programme. “The IMF negotiates if someone is unable to meet the deadline but we are poised not to do that.

The finance minister also informed the media that the government will discuss the matter related to the tenure of the SBP governor with the IMF and said: “We have already proposed to extend the governor’s tenure from three to five years but it cannot be extended beyond that.”

 

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Shahzad Paracha
The writer is a member of Pakistan Today's Islamabad bureau. He can be reached at [email protected]

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