Baqir says State Bank should be given operational independence to pursue objectives

Governor State Bank of Pakistan (SBP), Reza Baqir has said that the central bank should be given operational autonomy to pursue its objectives. He said that much talked about SBP Act Amendment Bill is not an ordinance and will be presented to the parliament for debate.

In an interview with a private news channel, he said the incumbent government had to approach International Monetary Fund (IMF) for addressing the country's economic issues.

“The completion of International Monetary Fund (IMF) review is good news for our economy because our investors including both local and foreign have received a message that Pakistan's economic conditions are moving forward in a right manner and there is now an independent assessment for it. This gives the biggest boost to the investor confidence, as investor thinks that they could bring in additional investment which will generate employment,” said Baqir.

The central bank chief stated that the dialogue with IMF will continue during the third wave of coronavirus.

Talking about their priorities during the covid-19 pandemic the Governor of State Bank of Pakistan said firstly we will need to save our employment.

He said that our economic policies in the past were faulty, if our current account deficit has not ballooned to $19 billion, we will have no need to approach the IMF. He said that in the past the exchange rate was not kept on a market-based rate due to which a current account deficit was created.

Talking about the rise in power tariff coming in the wake of the government's recent decisions the governor of the central bank said that our aim should be to reduce the circular debt.

Talking about the apprehensions regarding granting the State Bank of Pakistan autonomy the central bank chief expressed that the draft approved by the cabinet is a bill and not an ordinance that will be presented to the parliament. “Meaning a debate will take place on it, and experts will give their arguments,” he said.

Baqir informed that this is the sixth time that an amendment has been issued in the State Bank Act. “The current amendments are a part of a broader process to modernize the central bank in light of latest developments,” he said.

He was of the view that changing the act does mean that they cannot be changed again as the parliament will have the power to withdraw the amendments.

“Basically the objectives of the State Bank have been clarified in these amendments because in the present act the SBP objectives are not mentioned in the main body,” he said.

Talking about the proposed objectives of the State Bank of Pakistan, Baqir said that the central bank's objective will be first to reduce inflation secondly, the central bank should maintain economic stability, and thirdly, it will be responsible to bring economic development.

“The overall vision of this proposal is that the objectives of the central bank should be clear, and after clearing out the objectives the State Bank should get the operational independence to pursue its objectives without any interference,” said SBP Baqir.

The state bank should then be asked if they have achieved those objectives or not, he said. “Accountability begins with the clarity of objective, if the objectives are unclear then how can one be accountable,” said Baqir.

The Governor State Bank said in order to streamline the system, the government introduced different schemes including low-cost housing projects for the people drawing meager salaries and a subsidy has also been given to people on loans at a reasonable mark-up rate.

Replying to a question, Reza Baqir said the foreign reserves have increased from $7 billion to $13 billion. Appreciating the present government, he said the construction sector has been opened to minimize the burden on the labor community.