‘Understanding State Bank Amendment Bill 2021’

Economic policy experts question motives behind controversial SBP Amendment Bill 2021

The recent move by the government to make State Bank of Pakistan (SBP) autonomous is part of IMF agenda being imposed on Pakistan as the decision lacks transparency and goes against national interest.

This was the unanimous view of economic and fiscal policy experts during a webinar titled ‘Understanding State Bank Amendment Bill 2021’ organized by the Institute of Policy Studies (IPS) on April 5, 2021.

The event was chaired by Prof. Dr. Abdul Saboor, Dean Faculty of Social Sciences, PMAS Arid Agriculture University, Rawalpindi.

The speakers and discussants included IPS’ Chairman Khalid Rahman,  Vice Chairman Ambassador (r) Syed Abrar Hussain, Dr. Shahida Wizarat, Dean, College of Economics and Social Development, Institute of Business Management, Karachi; Dr. Pervez Tahir, former chief economist, Planning Commission; Qanit Khalil, chartered accountant and economic policy analyst; Raja Kamran, a Karachi-based economic journalist and Amanullah Khan, former president, Rawalpindi Chamber of Commerce & Industry (RCCI).

Commenting on the proposed amendments, Dr. Pervez Tahir lamented the removal of the word ‘national interest’ from the preamble of the existing SBP Act and argued that the proposed bill would delineate responsibility for controlling inflation to the SBP which has already failed in this regard. He further said controlling prices of food items is a provincial subject and has nothing to do with the SBP which can only control core inflation that has not increased substantially in recent years.

He was also of the view that the Pakistani government is giving much more than what IMF or World Bank could actually demand from a sovereign state through the proposed amendment.

Dr. Shahida Wizarat was of the view that independence of institutions can only be achieved through holistic policies. She rued Pakistan’s policies are not indigenous, rather dictated, as most of the officials running important institutions are “imported” which underlines the continuation of colonial era in this part of the world. Giving absolute autonomy to the SBP, she further said, is tantamount to making Pakistan subservient to the IMF and the World Bank.

Explaining the phenomenon of independence of central banks, Qanit Khalil termed the proposed autonomy to the SBP in line with the global trend. However, he argued independence does not guarantee price stability and economic growth of a country as proven by many studies. He also suggested further reduction in interest rates in Pakistan which pays 45% of its tax revenues to debt servicing – a number much higher than the developed markets where it stands at less than 5%.

Raja Kamran criticized the manner in which the proposed law was presented and approved by the cabinet without any debate, making the draft rather dubious. He questioned why the relevant stakeholders were not taken on board over this initiative. The actual draft of the bill was also not available for public or stakeholders’ review, he informed.

Dr. Abdul Saboor opined that autonomy of the SBP hinges on the progress of all the other institutions. However, this progress will remain a pipe dream unless the government introduces governance reforms.

He said, state institutions will never strengthen unless the country develops on all economic fronts. He accentuated the need for developing a counter mechanism so that foreign institutions are not able to exploit the weaknesses of the country’s institutions.

Concluding the session, Khalid Rahman said the initiative, prima facie, is an imposed one, which reflects the approach being taken in this regard since the former prime minister Moeen Qureshi’s tenure.

He believed some government officials have moved the bill with mala fide intentions to either turn the SBP into a subordinate institution of the IMF or pose themselves as more loyal to the IMF than the country.

He stressed the need for ensuring transparency in the whole affair as its absence is giving rise to extraordinary speculations which are detrimental to national interest.