LAHORE: The country’s leading economists believe the State Bank of Pakistan (SBP) has not responded effectively to wide-ranging discussions around its supposed loss of autonomy. They also blame the central bank for not doing a good enough job in countering the controversy surrounding this or engaging with the public in the run-up to the changes in the SBP act.

They emphasised the need of separating noise from the logical debates and decisions related to the issue of SBP autonomy, recommending the bank’s management to look into the communication-related issues that exist on its part.

“The whole narrative on SBP’s autonomy, as discussed in the mass media, has been misleading and remains controversial. On the other hand, the basic issues, such as the importance of low and stable inflation and SBP’s fundamental role in delivering this and fiscal weaknesses and its consequences for inflation/macro stability have not been adequately discussed,” said Dr Hamza Malik, United Nations Economic and Social Commission for Asia and the Pacific (Unescap) Development Division Director for Macroeconomic Policy and Financing while speaking at a webinar organised by the Sustainable Development Policy Institute (SDPI) on Monday.

“Frankly, the credibility of SBP and public’s trust in its various roles and objectives have been adversely affected,” he added.

Expressing reservations over changes in the SBP Act, he said the abolition of the Monetary and Fiscal Policies Coordinating Board (MFPCB) is not a good idea, as it will weaken an already weak formal institutional mechanism to coordinate macro-policies. Moreover, there is no clarity on the separation of responsibilities between board members and executive committee, accountability of SBP/Governor in delivering the objective and consequences of not meeting the stated objectives.

Speaking on the occasion, Dr Hafeez Pasha said while the country has been facing a shortage of 4 million housing units, the increasing interest rate on home financing by the SBP is absolutely not justified. “It was okay at 2 to 4pc. But it is disturbing if it goes beyond this,” he added.

Dr Pasha also expressed wonder over not publishing the inflation monitor bulletin it was earlier used to do the same on monthly basis. “The central bank should regularly make inflation monitoring reports on monthly, quarterly, half-yearly and yearly basis to keep the people aware of the situation,” he proposed.

Published in Dawn, February 8th, 2022