SBP Autonomy Bill, Too High The Stakes
The proposed amendments in the SBP Act which the cabinet passed without due diligence will affect State’s functioning in economy which has never received attention in 73 years. Abiding by IMF conditions, the incumbent government has granted utmost autonomy and unabated empowerment to the State Bank and threw economy and well being off the edge.
Not just the economy, the sovereignty and autonomy of State is at stake.
Chair person Aam Awam think tank Professor Dr Shahida in a long letter to Prime Minister Imran Khan notes that Pakistan is still in “colonial mode”. The granting of autonomy to such a pillar institution would drag it further down the colonial abyss. The government of Pakistan will become “subservient” to not only SBP but IMF as well. “The IMF is considered an extended arm of the US government, the SBP will therefore get subordinated to the US government on account of its subordination to the IMF… Section 46 B, sub section 8 makes it mandatory for the Government to consult the SBP for any legislation related with the SBP, who will convey its decision after consulting the IMF. Will this arrangement not provide a perfect opportunity to the US to further its political agendas related with Balochistan, KPK and Kashmir through the SBP?” She asks.
The Act awards asymmetric power to SBP, eroding power of the GOP by removing the finance secretary and ending any representation of GOP. It forbids GOP from providing guarantees of relief for acquiring loans from commercial banks. How else will the government be able to fulfill its expedinture needs, for instance the CPEC projects. More will be the reliance on foreign banks and thus debt to GDP ratio would worsen. Everything will revolve around the central bank governor, who will be more powerful than many constitutional position holders. The new proposal will give no space for input or suggestion from cabinet or parliament.
At large, the central bank would lose its vibrant relevance to country’s financial make-up and be representative of the foreign.
The present SBP objectives include both the monitoring of the rate of inflation and the rate of growth. But the SBP is abdicating its role and that too at greater political cost. Its primary objective would be debt payments to foreign banks and multilateral institutions like IMF. A very distant objective would be controlling rate of inflation. Regrettably, there is no accountability for SBP in case the bank fails to ensure price stability.
A hefty package of 10 million with benefits will be granted to the SBP Governor but no significant indicators have been mentioned to gauge the performance of the Governor and the Deputy Governor SBP. There is no accountability or penalty but absolute indemnity for officials. Adding Clause 52 to the bill, the SBP officials have been relieved of any responsibility for the decisions made in “good faith”. To give protection to the former governor and six other officials from a case being investigated by NAB, this clause has been added. Transparency International Pakistan (TIP) has thus lodged a complaint with Prime Minister Imran Khan on account of accountability concerns. The Act specifically mentions that FIA and NAB will have no jurisdiction over the SBP. According to finance ministry, approval from its Board will be required to initiate any proceedings. But with too much power at discretion of SBP officials, that seems unlikely. This move is contradictory to the anti corruption mantra and would discredit signature accountability narrative of PM Imran and his party. It will also add resentment in other institutions looking to elude accounability and desiring elitist treatment of the similar.
The SBP which symbolised Pakistan’s independence in financial sphere according to MA Jinnah would lose its foundational purpose due to the new Act. It would not be able to do much to regulate economic life and ensure price stability. An overly autonomous institute disconnected from government in a State still caught up with colonial baggage – that would have disastrous repurcussions for “Pakistan’s economic, financial, strategic, political and social well being”. According to Dr Shahida, “A more mature and serious analysis and consideration of what all is entailed in the proposals” is imperative.