How to save a democracy with empty pockets?

The supreme court orders the State Bank to release 21 billion but how will the State Bank do so?

Say there’s a bank account that is owned by a very powerful individual X, which has a certain amount of money in it. Another individual, Y, claims that X owes a certain portion of his account’s balance to Y. Y goes to court to claim his money and the court decides to rule in favor of Y. Now, because X is very powerful, he can choose to ignore the decision of the court without him going to jail (lets just say that even the police pay their bills with X’s money). But Y’s claim on the money is constitutionally valid, then what does the court do? 

The court orders the bank to take money out of X’s account and give it to Y. A court can do that, there is no question about it but the question is, whether a bank can do that? What does the principal dictate and who dictates what the principal ought to be. Now take a spoonful of salt and put it in this analogy because even though this analogy is a good way to visualize the scenario, the matters of Public Finance are not as simple. 

In the headliner news over the last weekend, the Supreme Court of Pakistan ordered the State Bank of Pakistan to pay the Rs. 21 billion required in additional funds to the election commission of Pakistan. These funds were meant for conducting the provincial elections in Punjab. But there is a categorical set of problems with the supreme court having to ask the central bank to “pay up”. First is the supreme court having to ask, the second is the precedent of the central bank being “ordered” to do something, and third is the treatment of SBP as a commercial bank that can “pay up” at will.

Political Background:

If someone has been living under a rock for the last one year, it is important for them to know the plot of the current season of the political soap opera of Pakistan. Feel free to skip the following summary if you are a constant consumer of the mainstream news.

Ever since former PM Imran Khan was ousted by a Vote of No confidence in April 2022, he has had one demand in general, and that demand is elections. Khan believes that his ravaging popularity amongst the people warrants him another easy win in the next general elections. Coupled with the current government’s handling of the economy it inherited, and the rising unpopularity that came as a result of being unable to handle it, Imran Khan naturally believes he has a good shot at winning a fair election. 

Article continues after this advertisement

In hopes that the provincial assemblies of Punjab and KPK would be landmine victories for the PTI, the assemblies were dissolved on the 14th and 18th of January respectively. What was not taken into account was the current economic crisis. And also the willingness of the current government to stand up and leave while the other party wins the race. 

What could be a very apt excuse was exercised by the current government, that the government of Pakistan did not have enough money to carry out these elections at this time. And it is true, it does take a lot of money to hold elections. As per a 2018 report written by Dawn, the cost incurred per voter in the general elections of 2018 was around Rs. 198. Adjust that for the current level of inflation and that cost already exceeds Rs. 300. 

Regardless, this unwillingness was taken note of by the Supreme court that came to its ultimate decision rather quickly. CJP Bandial taking a suo motu notice of the issue garnered a tirade of criticism from within the Supreme Court itself, making the apex court more controversial than it would ideally want to be. 

What is with the intervention?

As per the elections act, 2017, the election commission of Pakistan is liable to hold elections for a vacated seat within 90 days. While this may sound like an absolute condition, it is important to know that being an institution of the state, the election commission receives its money from the federal government for its operations.

As per section 22 of the Public Finance Management Act, 2019, “The operation of the Federal Consolidated Fund and the Public Account of the Federation shall vest in the Finance Division under the overall supervision of the Federal Government” . 

Because the finance division had refused to provide the requisite funds to the ECP in the stipulated time, the Supreme court found it was only just to bypass the finance division. So the Supreme court directed the State bank to release funds to the ECP. This creates a problem. Can the SC do this? The legitimacy of the decision is in question here. 

While the current decision is a short order, meaning the detailed decision will be made public later, it still states that the SBP should not bypass its constitutional requirement. Rather the approval from the finance division is to be made “Ex Post Facto” in this particular case by the orders of the Supreme Court.

Ex Post Facto means that the approval from the finance division would be taken after the release of the funds, by citing and providing the required paperwork. This is to say that, have the elections as soon as possible and worry about the money later.

What does ordering the SBP stand for?

Simply put, the final appellate court of a democracy such as ours, at least on paper, cannot and should not be directing an independent central bank in any matter whatsoever unless the latter is a defendant in a particular case. But the fact that the SBP in its current state is anything but independent makes it vulnerable to such unconstitutional instructions. The Dar-led Finance ministry is to blame for the weak central bank the country has to contend with currently. 

Another important consequence of this decision is the international implications of the decision. A country like Pakistan which is a net debtor of a lot of entities already places a huge amount of pressure on its central bank. With State Bank being made vulnerable in such a manner opens a pandora box of possibilities for bond holders and creditors around the world. 

How will the SBP pay the money?

Let us come to the viability of the decision in the face of the federal government’s defense. The government said that it cannot release the funds because of the deteriorating economic conditions of the country. Does the supreme court’s decision really take that into account?

While it could be okay for the government to shift goalposts on its budgeted expenditures, the state bank operates in a completely different way. Its allocations, releases and statements directly affect the money supply, reserve ratio and investor sentiment. This in turn has a huge impact on the state of investments and inflation in the country. This is exactly why, other very valid reasons, that the SBP was  made into an autonomous institution through legislation under the PTI government and Reza Baqirs governorship. 

If the state bank pays up the money to the ECP upfront, from its current pool of money, it can do that in a number of ways. The first option is that the state bank auction’s an unscheduled bond which raises 21 billion in short term loans, increasing the public debt in the short run. Just because it has now been shifted to the backend does not mean it still doesn’t impact the economy. So this method does not debunk the argument made by the federal government which pertains to the economic condition of the country.

The other way in which the State Bank can achieve this goal is by injecting money into the economy, simply put, by printing cash. This again stands in contradiction with the bank’s aggressively tightened monetary policy.

It is important to note here that the state bank of Pakistan is not a commercial bank, nor will it get the money back, after the elections happen. It is a lender of last resort and the government’s banker. It’s role is well-defined as a monetary and fiscal policy making institution that has to keep the banking system of the country stable. 


At time of writing, the unpleasant showdown between the legislators and the judiciary is at its peak. The State Bank has told the court that it has allocated the funds for the elections while the Standing committee on finance maintains that these funds cannot be released.

It is unfortunate that the central bank, that should remain apolitical and must be as independent and autonomous as possible to be an effective policymaker and implementer has been made into an active participant in the unending political circus the country currently faces. 

That the SC can make the SBP do a lot of things, but that won’t be right or constitutional. It will forever plague the central bank however, which is exactly why it should resist in whatever legally viable way it can. 


Shahnawaz Ali
Shahnawaz Ali
The author is a Business and Finance journalist at Profit and can be reached via email at sha[email protected] and via twitter @shahnawaz_ali1


  1. Good post ! Gulberg Executive Multan is a prestigious housing scheme located in the heart of Multan. It offers a range of residential options that cater to the diverse needs of individuals and families who desire a luxurious lifestyle. The project is built on modern architecture and design, offering a unique combination of elegance and functionality.


Please enter your comment!
Please enter your name here

Popular Posts