EDITORIAL: The enactment of the SBP Amendment legislation awaits its passage by the Senate. Federal Minister for Energy Hammad Azhar had vigorously defended the State Bank of Pakistan (amendment) bill when it was passed by the National Assembly and during the usual post-Cabinet press briefings by the Minister for Information and Broadcasting Fawad Chaudhary.
Finance Minister Shaukat Tarin is on record as having stated that the passage of the SBP bill from parliament is a “prior” sixth review condition that has to be implemented if the release of the one billion dollar tranche would remain an agenda item on the IMF Board of Directors meeting scheduled for 28 January has now been deferred to 2nd February at Pakistan’s request. Without this disbursement there are overwhelming concerns about the untenable possibility of a looming default followed by multilaterals/bilaterals/equity markets/commercial bank borrowing from abroad and domestically at rates well above what would be available otherwise. It is precisely for this reason that all stakeholders appear to be working behind the scenes to ensure the passage of the State Bank of Pakistan (amendment) bill from the Senate where the government is not in majority. And the likelihood of the virulent rhetorical opposition to the bill by members of the opposition, it is hoped, would not lead to blocking the passage of the bill in the Senate.
It is, however, ironic that instead of presenting the true state of affairs, government functionaries have chosen to skirt the real issues to defend the need for this amendment by citing frivolous reasons. They refer to the bill as having been agreed during the PML-N tenure deferring all monetary policy decisions to the Monetary and Fiscal Policies Coordination Board (disbanded as per the proposed amendment) and claiming that subsequent to tough negotiations with the International Monetary Fund (IMF) the government would now be able to appoint the Governor of the SBP as well as members of the SBP Board which would be empowered to take autonomous monetary policy decisions. Politicking on a matter that does not concern the general public, which remains focused on two macroeconomic indicators — inflation and unemployment--maybe justified from the opposition’s point of view but not from the government’s. In the process they undermine their own claim by not emphasising that the previous government spent billions of dollars to artificially support the exchange rate — a policy decision that no autonomous apex bank would have condoned. One would however hope that the government appointments to the SBP Board would be made after following a rigorous selection procedure and the power to dismiss members would not be exercised based on their refusal to accept government’s flawed directives.
It is alarming that the staff-level agreement reached between the government and IMF on 12 May 2019, later endorsed by the cabinet, in which it was clearly and unambiguously agreed to implement the conditions relating to the proposed SBP (amendment) bill, required ‘tough’ renegotiations as noted by government functionaries. The new man on the team, Shaukat Tarin, appointed as finance minister in April 2021, argued from day one that the IMF programme conditions were extremely harsh and pledged to renegotiate the terms with the Fund, terms that were agreed by the two previous signatories to the agreement. Later, reports indicated that the Pakistani team referred the IMF staff to the Law Ministry officials who categorically informed the Fund that the previous agreement on the SBP bill required a constitutional amendment for which the government simply did not have the requisite numbers in parliament — an admission that is extremely disturbing given the previous approvals by the economic team and the federal cabinet.
Copyright Business Recorder, 2022
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