ISLAMABAD: The federal cabinet on Tuesday approved three important draft bills – the State Bank of Pakistan (SBP) Amendment Bill 2021, the State-Owned Enterprises (SOEs) Bill and the Income Tax Amendment Bill, 2021 for withdrawal of corporate income tax exemptions that Finance Minister Dr Hafeez Shaikh said would help stabilise the economy and institutions.
Addressing a press conference after the federal cabinet’s meeting presided over by Prime Minister Imran Khan, Dr Shaikh along with Federal Minister for Industries and Production Hammad Azhar, adviser to the prime minister on institutional reforms Dr Ishrat Hussain and Secretary Finance Kamran Ali Afzal, stated that the SBP would have ‘absolute’ autonomy to check inflation and control prices.
The primary purpose of the proposed amendment, which the finance minister did not deny was a prior condition of the International Monetary Fund (IMF), would help control prices and inflation and take decisions about the exchange rate and monetary policy in an independent environment.
He said that everyone has been stating that the SBP Amendment Bill is approved to fulfil the prior condition of the IMF programme and added: but no one is bothered to ask why the government has taken the IMF programme.” The present government inherited a poor economy and paid Rs6500 billion debt servicing against the debt taken by the previous governments.
The minister explained that there would be a five-year “protected” term of the SBP governor in the proposed new law and the government would not borrow in terms of loans and guarantees from the SBP.
Monetary and Fiscal Policy Board would not exist after the passage of the bill from the parliament and the SBP governor and any other official would be accountable before the parliament.
Dr Shaikh, in response to questions, stated that the governor of SBP would be accountable before the parliament under the proposed law whereas the accountability aspect is not available in the existing law.
He added that inflation is not the responsibility of the SBP alone as federal, provincial and local governments’ role is equally important in this regard.
He further stated that external factors such as increase in the prices of POL products and other items also contribute to the incidence of inflation. He said it is important for the federal government to strike a balance between income and expenditure to control inflation and the present government has brought about balance by reducing expenditure. According to him, a barometer in this regard is primary balance which has been surplus by Rs400 billion and no money was taken as loan from the SBP.
However, he added, the prices of some items had increased in accordance with global market trends. The government had imported 4 million tons of wheat and 0.5 million tons of sugar, he said and added that the prices of ghee and oil had increased because of an increase in edible oil price in the international market. “The government has been providing subsidy on five items at Utility Stores Corporation (USC) to protect the poor and will provide on more items in the Ramazan package that would be approved by the ECC today [Wednesday],” he added.
He said the draft SOEs bill would take the administrative control of SOEs from the concerned ministries that would be given to the federal government. The federal government would run the SOEs and SOEs’ Chief Executive Officers (CEOs) would be appointed by their Boards of Directors under the proposed bill, he added.
About privatisation, Dr Shaikh said that privatisation had not been an easy task and privatization process after a slow start was being taken ahead. It faced delay due to Covidd-19 otherwise some entities would have been privatized by now, he added.
Dr Ishrat Hussain said the SOEs had been making losses, however, this year these losses were reduced to Rs123 billion from Rs 268 billion of last year. “More than 50 CEOs had been appointed in a transparent manner with a large number of expatriate Pakistanis appointed as CEOs.”
According to the Secretary Finance, finance ministry is accountable for fiscal policy while monetary policy is the sole domain of the SBP and parliament can summon any official of the regulator, including its governor, for the purpose of accountability.
Minister for Information and Broadcasting Shibli Faraz said the draft SBP Amendment Bill 2021 was approved in the federal cabinet meeting. The government had given more powers to the SBP, enabling it to now make “independent” decisions.
In the past, governments, he said and added used the SBP for political gains. Central banks in some other countries also enjoyed greater automation. He said the cabinet also approved the draft Income Tax Amendment Bill, 2021.
Faraz said the cabinet appreciated the former Justice Azmat Saeed’s decision that he would not be receiving any privilege as chairman of Broadsheet Commission. He said that due to effective measures, the government had been able to reduce the losses of state-owned enterprises (SOEs) to half. He said Pakistan-Russia have approved north south pipeline protocol.
Replying to a question, Faraz has said the government sought open ballot for Senate elections to make them transparent but the opposition showed its “hypocrisy” on this important issue.
He expressed his optimism that Sadiq Sanjrani, the government’s candidate for the slot of Senate chairman be re-elected.
APP adds: Minister for Finance and Revenue Dr Abdul Hafeez Shaikh Tuesday said the Cabinet approved draft of State Bank of Pakistan (SBP) Amendment Bill 2021 to give “absolute autonomy” to the central bank.
The minister said the Central Bank's core objective was to control inflation and to fight increase in prices and the law also aimed at providing the Bank further autonomy to ensure that it fulfills its objectives of price stability with complete independence.
He said the law would also help SBP to independently fulfill the requirements of monetary policy and exchange rates without intervention of the government.
Hafeez Shaikh said the government would stop borrowing from the central bank so that the federal government could manage financing by its own resources or by lending from the commercial banks.
Further he said the monetary and fiscal coordination board would also be abolished and instead the government would arrange coordination through special committees.
The minister said the SBP Governor would be appointed by the President of Pakistan and the Bank would only be accountable to the Parliament.
He stated the second law approved by the cabinet was about Pakistan's State-Owned Entities (SOEs) that were engaged in business activities.
The purpose of this law is to provide more authority to the SOEs by stopping intervention of the ministries and the ministers.
The board and the Chairman would be appointed by the government under a transparent and professional way and the CEOs of the institutions would appoint the boards, instead of the minsters so that professionalism in these areas could be promoted.
Further, he said, the CEOs would be made more secure so they run their companies without any pressure to compete with the private sector.
Third law bill by the government, he said was about tax exemptions. Many companies and sectors are exempted from taxes and to abolish such discrimination and to bring a uniform system all such exemptions would be exempted under the law.
He said under Prime Minister Imran Khan' vision to collect taxes in a way that poor people should not be affected, tax system is being reformed.
He said these bills would be followed on a fast-track basis.
About International Monetary Fund, Shaikh said Pakistan and the IMF were currently engaged to resume the Extended Fund Facility that was paused for few months due to COVID-19.
"The IMF international Board would meet soon and financial lending for Pakistan will resume", he added.
Adviser to Prime Minister on Institutional Reforms Dr. Ishrat Hussain on the occasion said major reforms in the institutions were being introduced to promote transparency and professionalism in the government departments.
He said the due to these reforms, losses in government institutions were drastically reduced and efforts were made to wipe out all losses in future.
To another question, Sheikh said the government was minimizing gap between the income and the expenditure.
Besides, he said, the government had also not borrowed a single rupee from the Central Bank nor did it provide additional grants to the government departments.
About inflation, he said the government had not control over the prices of basic kitchen items which are imported from abroad.
However, the government in this regard can only do to provide assistance to the extreme people and it is providing financial support to over 15 million, he added.
He said that the targeted subsidy would be further extended in future.
Minister for Industries Hammad Azhar said that utility stores was providing wheat flour at a subsidized rate of Rs 800 per 20 kg bag, sugar at Rs 68 per kg, ghee at Rs 125 per kg and the price was retained for over a year and it has been decided that this price would continue in future as well.
The Chairman Federal Board of Revenue Javed Ghani was also present on the occasion.
Copyright Business Recorder, 2021
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