The government has decided to legislate the matter of giving “absolute autonomy” to the State Bank of Pakistan (SBP) and convened a National Assembly session to table a bill in this regard on Monday (tomorrow).
The proposed bill on the central bank’s autonomy has been approved by the federal cabinet and will now be presented in the National Assembly for Act of Parliament.
Also read: Govt proposes absolute autonomy for SBP
President Arif Alvi has summoned a session of the lower house of parliament at 4pm on Monday.
The issue to make SBP more independent of the federal government has given rise to a raucous debate, which primarily aims at targeting inflation rather than the economic growth.
Since greater autonomy for the State Bank was one of the preconditions of the International Monetary Fund (IMF) for releasing tranches of its $6 billion loan, many have raised fears about its long-term impact not only on the economy but also on the country’s overall sovereignty.
The important changes for the autonomy are giving up the government’s right to borrow from the central bank to keep a check on deficit financing done through printing new money, extending the tenure of the SBP governor from three to five years (renewable for another term) to minimise political interference and also bring it closer to international practice, and providing immunity to SBP officials for decisions taken in good faith.
There has been a jarring debate on the pros and cons of the proposed changes. Those opposing them argue that the changes could free the central bank from any accountability while giving it too much power.
They also contend that the deletion of the reference to “growth” in the preamble of the existing SBP Act will make the SBP focus exclusively on price stabilisation and not give any attention to growth.
Another target of criticism is the restriction imposed on the government from getting loans from the SBP as it may increase reliance on borrowing from commercial banks. These restraints, it is feared, would further crowd out borrowings by private investors.
On the other hand, those who support further autonomy stress that these measures would increase transparency, make monetary policy more effective and freer of political influence. This independence would mean making the government fiscally responsible through its borrowing restrictions.
They disagree that there would be no accountability as the governor will be required to submit an annual report to parliament regarding achievements of the bank’s objectives, the conduct of monetary policy and financial stability.
The PML-N has categorically declared that it would not support the government’s move.
Last week, PML-N leader and former Sindh governor Mohammad Zubair expressed his party’s reservations over the bill saying that they would not allow it to be passed.
Zubair said the bill was being introduced at the behest of the IMF and added that after its passing, the premier, finance minister and the Parliament would lose any and all control over the SBP.
He said that under the new bill, the SBP governor, deputy governors and executives including former office holders were immune to any investigations from the FIA and NAB.
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