Govt won’t back off on SBP autonomy: Tarin

ISLAMABAD:

As the International Monetary Fund (IMF) gave a second lifeline to Pakistan to meet a crucial condition, Finance Minister Shaukat Tarin on Wednesday declared that the government would not back off from having the State Bank of Pakistan (SBP) amendment bill approved by the Senate.

Addressing a news conference, Tarin also said that the global commodity prices-induced “super inflation cycle” will stay for at least two to three more months.

“We still have a few days left to get the SBP bill passed from the Senate and we would not back off,” said Tarin while responding to a question whether the government had a fallback option if the IMF did not revive the programme next week.

“At our request, the IMF has extended the deadline till February 2, and in the coming days the SBP amendment bill will be passed from the Senate,” said Tarin.

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The IMF has set five prior actions for the approval of the next loan tranche and the government has so far implemented four conditions. The SBP amendment bill seeks absolute autonomy for the central bank with no accountability.

Talking about the rising prices in the country, Tarin said that the super inflation cycle might stay for next two to three months.

He admitted that the salaried class was suffering because of high inflation, saying the government was thinking of starting a programme to increase its income.

To a question as to whether or not the government had the fiscal space to subsidise the earnings of the salaried class, the minister replied that the government would try to find innovative ways.

However, the minister did not elaborate further on the plan.

Tarin said commodity prices in the international market coupled with turmoil in Afghanistan had all added to the pressure on the economy.

“To stabilise the exchange rate, the government needs to contain inflation,” he said. “This is the reason behind currency depreciation.”

To a question about the central bank’s move to declare lending to the federal government risky, Tarin said: “The government cannot be treated like any other bank client and I will talk with the SBP about its decision.”

The Express Tribune had reported last week that the SBP has directed commercial banks to start taking into account the probability of default by the federal government.

The minister also commented on the Transparency International report that placed Pakistan at the 140th position out of 180 countries on its corruption index, lowering the country’s ranking by 16 notches.

Tarin said Prime Minister Imran Khan had zero tolerance against corruption and the government would give a comprehensive response to the Transparency International report after reviewing the details.

He maintained that the Economist Intelligence Unit had lowered Pakistan’s score on the points of corruption by the ruling elite and the rule of law, which he said were not justified as the premier was not corrupt.

The finance minister again boasted about The Economist magazine’s Global Normalcy Index, saying Pakistan had remained on top of the Index because of its “good” performance.

But the Institute for Policy Reforms (IPR) -- an independent think-tank -- has critically reviewed the government’s claim.

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The IPR said the index assessed the scale at which an economy was currently operating compared to the pre-pandemic level.

“The index is not a measure of economic dynamism or performance. So, an economy in sub-Saharan Africa, which was not especially prosperous in 2020 could have a higher Global Index score in 2022 than that of say Singapore”, the IPR added.

“It merely means that despite the virus, the economic activity of that country is closer to reaching the level of early 2020.”

The IPR further stated that the index did not suggest that an economy lower on the Normalcy Index was performing worse than an economy at a higher level.

“The other point to note is that economic activity in Pakistan was already at a snail’s pace before the pandemic.”

The IPR added that when growth was already low or minus before the virus broke out, it was “no badge of honour” to reach back to where the normal was.