ISLAMABAD: The National Assembly’s Standing Committee on Finance and Revenue on Monday cleared the State Bank of Pakistan (SBP) Amendment Bill 2021 with a couple of changes suggested by the opposition members.

The panel, chaired by Pakistan Tehreek-i-Insaf (PTI) MNA Faiz Ullah, was assured by Finance Minister Shaukat Tarin that the bill did not envisage absolute autonomy to the central bank, but only sought to enhance its independence. He said the government would appoint the board of directors that would control the central bank and its senior management.

In any case, the government retains the option to amend the proposed law with a simple majority in parliament if, at any time, it felt the financial sector regulator appeared to be enjoying absolute powers, he said.

He said the SBP governor would not have full powers to appoint or sack senior management and the government would have the powers to examine such decisions.

Finance ministry says IMF requested to reschedule meeting of board of directors for approval of 6th review till end of January

On the insistence of opposition members, however, the committee recommended three major changes to the bill: a bar on appointment of dual nationals as SBP governor; a two-year restriction on the employment of a governor in an institution that he/she may have engaged in negotiations with; and, making the governor and bank’s senior management answerable to parliament.

The clearance of the bill from the NA committee followed an official confirmation by the Ministry of Finance that it had “officially requested the International Monetary Fund (IMF) to reschedule the meeting of the board of directors for the approval of 6th review till end-January”.

In a statement, the ministry said the two bills required by IMF had been introduced in the assembly and “as soon as the legislative procedures are completed, the IMF board will consider it for approval”.

The finance minister said the government was enhancing SBP’s autonomy in line with international practices, adding that it would not be allowed to be absolutely independent. He said it was a misconception that the government would have no say in the central bank’s running or that it would lose control over the economy. He said all major decisions would be taken by the finance minister and the governor, even after the bill was passed by the parliament.

The government will select and appoint the members of the SBP board that would control the bank and the government could clip the SBP’s wings in case it did not accept the government’s stance. He said that under the proposed law, the IMF required Pakistan to put a stop to government borrowing from the central bank.

He said the present government did not borrow anything from the SBP over the last three years, but previous government’s borrowing stood at about Rs7 trillion.

SBP Governor Dr Reza Baqir told the committee that he did not have nationality or permanent residency status abroad, and had resigned from the IMF on assuming charge as SBP governor, even though there was no bar to do so at the time.

He also said that certain individuals had served as SBP governor while on leave from their jobs at international lending institutions.

The finance minister said the proposed law required the SBP board to decide how much profit the central bank could retain and pass on the rest to the federal government. Also, the appointment of deputy governors would also remain within the ambit of the government. He said that giving the governor a five-year term was to enable him to perform better.

Published in Dawn, January 11th, 2022