KARACHI: While the common man in Pakistan remains oblivious to the impact a monetary policy – good or bad – has on life, political forces appear to have done little, if at all, to educate the masses on this technical issue. There is reason to question if they themselves understand the implications.

Pakistan Muslim League-Nawaz’s Sartaj Aziz, for sure, knows what he is talking about, having been the country’s finance minister in the past. “The role of the monetary policy in Pakistan is subservient to the fiscal policy,” he said. Elaborating, the veteran economist said: “In Pakistan, if there is a budget deficit, the government starts borrowing. The monetary policy is not formulated independently; rather it has become a by-product of the fiscal policy.”

Talking of SBP’s autonomy, he said: “It was our government in 1997 that made reforms and withdrew government directors from the SBP board. The banking sector flourished as a result. However, this government has done away with it. The SBP is now under the ambit of the Finance Ministry and we see the repercussions. The framework is right, but it’s bad governance that is harming SBP.”

Mr Aziz stressed that the monetary policy must be evaluated overtime and lessons must be learned to prevent further damage.

“In our party manifesto, we have approached the subject with commitment to micro-economic stability and financial sector reform,” he concluded.

Haider Abbas Rizvi of the MQM, the coalition partners, said the monetary policy was “not that great and it is quite worrisome that the government is the biggest borrower when it comes to bank loans”. Stressing that the monetary policy had remained unfriendly to the masses, he continued: “In our shadow budget, we had emphasized that the spread must be reduced and so must the mark-up.”

Terming it a raw deal, he added: “For the common man there is no liquidity available. World over, there is a strong trend of allowing for self-employment and self-sustenance, but we are not part of the trend.”

Stressing that financial management rules have been overturned, he said: “It’s due to uncalled for interference that we see resignations in the State Bank. This shows how much political pressure there is, and highlights that the central bank is not autonomous.”

Rizvi said that high interest rates needed to be cut down and inflation needed to be addressed immediately.

Pakistan Tehrik-e-Insaaf’s Asad Umar said the problem with Pakistan was at the fiscal end. “The government is not willing to tax the powerful segment of society and hence it’s short of revenue. It is not wiling to curtail its non-productive expenditure either; an example of which is the Rs500 million losses in public sector. As a result, the government is running a terrible fiscal deficit which has never seen before in Pakistan. Last year’s fiscal deficit increased to rs1.6 trillion.”

He continued: “It needs to be pointed out that taxation isn’t financing it. Traditionally, we borrowed from foreign donors, but now even that is not happening while the FDI has dropped. The only thing that is safe for the government is to rely on is monetary expansion through the State Bank, printing notes or open market operations (OMOs).”

Umar was less critical of the SBP and said that though it has through professionals at the helm, “the back to back resignations need to be looked into as it clearly indicates political pressure … SBP is fairly autonomous, but when it comes to the monetary policy, it isn’t.”

Jamaat-e-Islami’s Mohammad Hussain Mehanti said the party “totally rejects the monetary policies” of the government. “The balance of payment crisis is increasing and the government’s policy of relying on lending institutions is not a way out,” he argued. “Our policy should be focused on self-reliance and must provide an enabling environment,” he added. Calling for active public participation on the monetary policy, he said the policy had to be “Pakistan friendly”.

When asked if the party believed in SBP being an autonomous institution, he commented: “The political pressure on the central bank is too obvious to be ignored.”

He continued: “Unlimited borrowing needs to be decreased. Never in the country’s history do we see so many loans from national and international institutions that have been availed in the last four years. The scenario is so bleak that when these rulers wrap up and leave, Pakistan will have such huge debts that would be hard to pay off. Restrictions need to be imposed on this trend today.”

Awami National Party’s Bashir Jan too expressed a similar view. “Over the years we have seen individuals run this country who have no loyalty to it. From Shaukat Aziz to Moin Qureshi and the set that we have now, it’s visible that these people have done favours to themselves and their masters; not to Pakistan. Our monetary policy is a case in point.”

He said: “The SBP is not an independent institution. It must be depoliticised and morally strong individuals need to be there to take charge, so that they can withstand the pressure.

“The monetary policy must have an incentive for small businesses and allow the common man to flourish. If the government and the SBP think they can control inflation by increasing interest rates, they are wrong. What we need is a policy that allows for an enabling environment,” he concluded.