ISLAMABAD: The Pakistan Muslim League-Nawaz (PML-N) has submitted its ‘note of dissent’ to the National Assembly’s Standing Committee on Finance and Revenue over rushing through the State Bank of Pakistan Amendment Bill 2021 without detailed reading despite its serious implications for the country’s sovereignty.

In a letter to the chairman of the standing committee, PML-N MNA Ahsan Iqbal said observations pointed out by him in a meeting of the committee required serious consideration but “were overlooked in haste to meet timeline agreed by the government with the IMF”.

He said the proposed amendment bill had very serious and far-reaching implications for monetary sovereignty of Pakistan, lamenting that the government had discussed the proposed bill with the International Monetary Fund for months and weeks but did allow even a full day to the legislators for consideration.

“National Assembly of Pakistan is a sovereign body and is not bound by any undertaking by the government with IMF,” he said, noting that the central bank should enjoy reasonable autonomy to carry out its monetary policy role effectively but it should not be made a parallel empire within the state.

Ahsan says proposed bill has serious implications for Pakistan’s monetary sovereignty

Ahsan Iqbal said the proposed law envisaged that the State Bank (SBP) would maintain low and stable inflation as primary objective as guided by the government’s medium-term inflation target, but terms “price stability”, “low and stable inflation” and “medium-term” had not been defined. If the SBP would not set any inflation targets for itself as a statutory requirement, there was no clarity about parameters for judging its performance, he added.

The PML-N leader said there should be separation of the office of chairman of the SBP board of directors and the chief executive (governor) to strengthen oversight function of the board.

Also, he added, the bill specifically disallowed the SBP to lend to the government even in the event of emergencies which would leave the government at the mercy of commercial banks which could then fix high interest rates on treasury bills and bind the hands of the government to address the issues ensuing from calamities.

This provision effectively blocks the central bank from performing its hitherto, and generally globally accepted, principal role as the lender of last resort.

Ahsan Iqbal said that shortlisting of candidates should either be the prerogative of the government or the SBP board of directors and not that of the governor. He proposed that the terms and conditions of service, including remuneration of the governor and deputy governors, should be determined by the government and the SBP should not be given the right to fix the market-based remuneration itself.

He said it was ironical that the SBP would remain a lender of last resort for scheduled banks whose oversight was its mandate to ensure that the banking system operated in a healthy manner, but it would not a lender of last resort for the state.

He was of the opinion that the SBP should not be consulted before the introduction of any bill by the government or parliament which might have a bearing on its functions. It should, of course, as a key stakeholder, be consulted by the parliamentary committees concerned as part of the process of deliberations on the bill, but not necessarily prior to its submission.

Ahsan Iqbal said the profits of the SBP were reflected as non-tax revenues in the budget at present, but excluding its profits from non-tax revenues under the proposed law would be a big resource gap for future governments. “Who will benefit from SBP profits if not the state and people?”

He noted that giving the SBP a high degree of autonomy with no clear parameters for evaluating its performance and ensuring its accountability to its only shareholder — the state of Pakistan — was unreasonable.

Published in Dawn, January 12th, 2022