Poll funding errand puts central bank in a bind

Published April 16, 2023
Experts think the apex court order is akin to asking a bank to make a payment on behalf of a depositor without the latter’s consent.—AFP
Experts think the apex court order is akin to asking a bank to make a payment on behalf of a depositor without the latter’s consent.—AFP

KARACHI: The State Bank of Pakistan (SBP) seems to be caught between a rock and a hard place in the aftermath of the Supreme Court’s order of April 14.

The apex court has directed the central bank to “allocate and release” Rs21 billion on Monday for elections in two provinces from the Federal Consolidated Fund (FCF) “lying under its control and management”.

Experts that Dawn spoke to believe the SBP neither controls nor manages the specific fund that the highest court of law wants it to release for an exercise that the National Assembly has formally opposed already.

A former central banker said the demand for disbursing money from an account of the federal government without approval from the National Assembly is unprecedented.

“It’s like asking a bank to make a payment on behalf of a depositor without the latter’s consent. The central bank has no business spending money it doesn’t own,” said a former deputy governor of the SBP while requesting that he not be named given the sensitivity of the matter.

The only possibility under the prevailing law, according to the retired deputy governor, is for the SBP to “donate” money from its own cash. This can be done under a provision that allows the SBP to use its resources for the promotion of research in banking and finance.

A bureaucrat who retired from a most senior position in the federal government noted that under Article 190 of the Constitution, which deals with “action in aid of” the Supreme Court, the court cannot issue directives for parliament.

The Constitution says “all executive and judicial authorities” must act in aid of the Supreme Court. In other words, the apex court can issue a directive for the federal cabinet, which is part of the executive, but not for the legislature, which is parliament.

Creating a charge on the FCF requires an act of parliament, according to the government. The federal cabinet already approved a bill presented by the Finance Division on April 9 titled “Charged Sum for General Election (Provincial Assemblies of Punjab and KP) Act, 2023”. Subsequently, the same bill was presented before the National Assembly, which rejected it.

“The trichotomy of power can’t be done away with on a whim,” said the retired bureaucrat while referring to the three pillars of state — legislature, executive, and judiciary — envisaged in the Constitution.

Barrister Salahuddin Ahmed — partner at law firm Malik, Chaudhry, Ahmed & Siddiqi — told Dawn there’s a question mark over the part of the Supreme Court order that requires the government to seek ex post facto approval from the National Assembly for the Rs21bn expenditure.

“How can anyone expect to get ex post facto sanction from parliament for the precise grant that it has already refused?” he said.

“Will it not be in violation of the Constitution if the government fails once again to take approval after spending the money?” he said.

The SBP spokesperson was approached for comment, however, there was no official word until the filing of this report.

Published in Dawn, April 16th, 2023

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