Contravention: Govt fails to convene legally-binding meeting

Delays mandatory sitting of the Monetary and Fiscal Policies Coordination Board.

ISLAMABAD:

For the third time in just nine months, the federal government has violated an act of parliament as it failed to convene a legally binding meeting of the coordination board, resulting in the delaying formulation of economic policies that have a direct bearing on national output. 

The federal government has put the issue of synchronising the country’s fiscal, monetary and trade policies on the back burner. It is delaying a mandatory meeting of the Monetary and Fiscal Policies Coordination Board, said sources in the Ministry of Finance.

The government is also facing difficulties in picking a suitable candidate for the post of State Bank of Pakistan (SBP) governor with only 17 days left before the lapse of the legally binding deadline.

In addition, the government is delaying the board meeting at a time when IMF-determined balance of payments’ projections, particularly of trade and current account deficits, are proving wrong. Further, a tight fiscal policy has also started affecting economic growth, which fell short of the target in the second quarter of the fiscal year. Under the SBP Act of 1956, the federal government is bound to call the meeting of the board in each quarter of the fiscal year aimed at bringing in line the three main economic policies.

The board is chaired by the finance minister, with other members being the commerce minister, deputy chairman of the Planning Commission, the SBP governor and the finance secretary. Two eminent macro and monetary economists are also board members.  However, so far all the shots are being called by Finance Minister Ishaq Dar, with the Minister for Planning and Reforms Ahsan Iqbal and the Minister for Commerce Khurram Dastgir having little say in policy-making decisions.

The Economic Advisory wing of the Ministry of Finance has already reminded Dar to call the overdue meeting, according to sources. The last meeting of the Board was held in January 2013.

“The government was in process of reconstituting the board and its maiden meeting will be called soon,” said Rana Assad Amin, spokesman for the Ministry of Finance.

The SBP Act also says that the board will meet before finalisation of the budget to determine the extent of government borrowing from commercial banks, taking into account credit requirements of the private sector, liquidity expansion determined by the Central Board and expected changes in net foreign assets of the banking system.

The government is going to discuss next year’s budget with the IMF by end of the current month, but without seeking opinions of the other two important ministries, said the sources.

Deadline approaches

As deadline to appoint a permanent SBP governor approaches fast, the government is also facing difficulties in finding a suitable candidate, sources said. Under the law, a new governor has to be appointed within three months of the resignation of a governor. Former SBP governor Yaseen Anwar had resigned with effect from January 31 and his successor has to be appointed by April 30.

There were reports that the government wanted to appoint Aurangzeb Khan, a banker
whose family is close to Prime Minister Nawaz Sharif.
However, sources said, Khan had demanded a monthly salary of Rs10 million – a condition that annoyed the premier.

Amin, however, denied Khan had demanded the amount.

Before departing for the US, Dar told The Express Tribune that a summary to appoint SBP governor has not been sent to the PM’s Office yet.

As the government faces problems in finding a candidate, Masood Ahmed, who is currently serving as director for Middle East and Central Asia Department of the IMF, could be one possible option.

Published in The Express Tribune, April 13^th, 2014.

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