Joint session: Pakistan approves central bank bill

The joint session of Parliament approved an amendment to the State Bank of Pakistan (SBP) Banking Services Corporation Ordinance 2001 to enable the central bank to meet emerging operational needs of the banking sector.

However, the amendment is different from the bill that grants autonomy to the SBP, which is under negotiation with the International Monetary Fund (IMF). This bill is called the SBP Amendment Act 2021, and remains pending. The government did not specify when it will be laid in Parliament. If adopted, the bill will reduce the Finance Ministry’s oversight of the SBP by removing its nominee on the central bank’s board and fully meet the IMF conditions, reported Bloomberg.

The bill is key to clearing the hurdle with the IMF. Despite repeated statements by the SBP governor and the finance ministry, the IMF has yet to announce the resumption of the programme.

Pakistan's rupee extends gains for third successive session against US dollar

This, along with other factors, has weighed in on the rupee that hit a historic low of 175.73 against the US dollar last week.

The Banking Services Corporation (Amendment) Bill 2021

Meanwhile, in a high-voltage joint session of the Parliament on Wednesday, lawmakers on Prime Minister Imran Khan's side voted in favour of the other bill -- The State Bank of Pakistan Banking Services Corporation (Amendment) Bill, 2021 -- aimed at optimising the central bank’s operational efficiency by bringing it in “conformity with the emerging operational needs”.

SBP bill sails through joint sitting

The much-awaited crucial bill had been passed by the National Assembly on June 10, 2021 but could not be passed from the upper house of the parliament within the constitutionally prescribed period of 90 days due to stiff resistance from the opposition the government could possibly face in the Senate.

However, the government wanted to pass the crucial bill at all costs, and finally managed to sail through the bill from the joint sitting of the parliament, in order to strengthen the mechanism of the top-level appointments in state-run financial banking regulator.

According to the statement of objects and reasons, a new sub-section has been introduced for the appointment of an acting managing director within a period of 60 days – from the date of vacancy, provided that the managing director will be appointed within a period of three months from the date of the occurrence of vacancy.

It says that the power of the board of directors to appoint external auditors has been proposed in line with good governance.

“An enabling clause on creation of subsidiaries by SBP-Banking Services Corporation (SBP-BSC) with the approval of board and SBP under the ordinance has been introduced for operational efficiency,” it added.

It further says that amendments have been proposed to exempt the gratuity and provident fund of employees of the bank from attachment as already provided for, in case of pensioners to make the ordinance consistent with the existing compensation benefits.

In order to provide adequate protection to the bank and its officers for actions taken in good faith, amendments have been proposed, it said, adding a new section has been proposed to legally protect the proceedings of the board and its committees from any questions arising only on the grounds of any vacancy or any defect in the constitution of the board.

An earlier version of the story erroneously mentioned the bill as key to clearing the IMF hurdle. However, the error has been corrected.