ISLAMABAD: Pakistan has agreed to ensure a set of policy measures to enable convening of the meeting of the executive board of the International Monetary Fund (IMF) by mid-September for approval of $502 million disbursement.

Soon after return from Dubai attending the IMF meetings, Finance Minister Ishaq Dar presided over meetings in Islamabad even on Sunday on energy sector, State Bank autonomy, tax expansion and privatisation to meet targets considered important for the IMF to approve the next tranche.

Informed sources said the government had assured the IMF staff mission in Dubai that it would implement certain measures before the board meeting.

The bidding for the privatisation of National Power Construction Company has been convened on Tuesday to meet one of the prior actions.

In a separate meeting of the cabinet committee on privatisation, Mr Dar approved a reference price for the sale of NPCC. Some more divestments would also be expedited.

Likewise, a meeting of the National Assembly Standing Committee on Finance was convened on urgent basis to fulfil some of the important agenda items. The standing committee had become dysfunctional after the deseating of its chairman Omar Ayub Khan.

The committee met on Monday night and nominated Qaiser Ahmed Shaikh temporary chairman to hold proceedings and meet the target for clearance of State Bank of Pakistan Amendment Bill 2015, a conditionality of the IMF programme.

The finance minister presided over a series of meetings on energy, including one with chairman and members of the National Electric Power Regulatory Authority, to ensure a power sector plan to ensure improved recoveries from consumers to address stock and flow of power sector dues.

A number of deficiencies on reforming the power sector have been a stumbling block towards smooth disbursement of funds from the World Bank, Asian Development Bank and other lending agencies.

The finance minister also had a meeting with US ambassador Richard Olson on Monday and exchanged views on recent IMF talks and upcoming visit of the prime minister to the US.

On the other hand, the IMF resident mission in Islamabad cancelled a background briefing to journalists at the eleventh hour without assigning any reason.

The NA standing committee soon after electing a temporary chairman approved the proposed State Bank of Pakistan (Amendment) Bill 2015 to set up an independent monetary policy committee to take critical monetary policy decisions.

Finance Secretary Dr Waqar Masood said that the government has requested the committee for the passage of law because it proposes some important amendments to SBP Act of 1956.

After the amendments, powers would be taken from Executive Board of the SBP and delegated to the Monetary Policy Committee to determine policy rate and do away with the perception of government influence in SBP decision with respect to policy rate.

SBP Deputy Governor Riaz Riazuddin said the total members of the committee would be nine, including governor of SBP, and majority of them would be experts from the private sector.

The purpose of amendments in the SBP Act 1956 was to bring the existing legislation in conformity with the international best practices of a modern central bank

According to statement of objections, the amendments were being proposed for the reasons because the existing clauses pertaining to shareholders, executive committee and local boards were no longer relevant after various amendments as well as promulgation of the Bank (Nationalisation) Act, 1974.

The amendment proposed that a statutory monetary policy committee with external experts to be appointed by the federal government will be established, which will be responsible for formulating, supporting and recommending the monetary policy and taking appropriate decisions relating to key interest rates, supply of reserves, exchange rate policy and limit and nature of advances and loans to the government.

The main object for introducing this statutory committee is to enable the SBP to perform its essential functions in a professional way in a changing and emerging financial environment. Consequently various sections in the Act have also been amended to secure the independent statutory role of the Monetary Policy Committee.

A new section on lender of last resort has been introduced in the Act to provide legal certainty to the support that is already being provided by SBP to the troubled banks.

Another new section on regulatory powers has been introduced in the Act to provide explicit powers to SBP for issuing directives, imposing and recovering penalties, which is already being exercised by SBP under Banking Companies Ordinance 1962.

The role of SBP has been strengthened further by substituting the federal government’s approval wherever required, with the board’s approval.

Published in Dawn, August 11th, 2015

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