ISLAMABAD: The approval of State Bank of Pakistan (SBP) Amendment Bill 2021 has literally become 'make or break' issue for the revival of stalled IMF program.
Top official sources hinted that the government might make efforts to get the controversial SBP Amendment Bill 2021 passed in today’s (Friday) meeting of Senate by bulldozing it. If it is not done on Friday, then two more working days are left next week i.e. Monday and Tuesday till the meeting of IMF’s Executive Board scheduled to be held on February 2, 2022, in Washington D.C.
The IMF's Board will consider Pakistan's case to accomplish the Sixth Review and release of $1 billion tranche under the Extended Fund Facility (EFF). The IMF’s Board had extended the scheduled meeting thrice on the request made by Pakistan. The sources said that it might prove to be the last extension, then the IMF may ask for re-negotiations keeping in view the fresh macroeconomic data available till December 2021. The sixth review parleys were done on the basis of official data till September 2021. How much it could be stretched, asked the relevant sources.
It poses serious questions for the IMF that how much sustainability of a piece of legislation can be guaranteed when the mainstream political parties, including the PMLN and PPP, are publicly announcing that whenever they come to power, they will undo all controversial amendments in the SBP law. Any piece of legislation having immense importance for the economy should have been passed with a a larger consensus instead of expediency because if it is bulldozed, it will not remain long-lasting.
On the other hand, one top cabinet minister of PTI government confirmed to The News on Thursday that the government would get approval of Senate of Pakistan to convert the SBP’s Amendment Bill into an Act of Parliament. "There will be no need to convene a joint sitting of both the houses of parliament to pass the SBP’s Amendment Bill 2021,” he added.
When contacted, former Director General (DG) Economic Reform Unit (ERU), Ministry of Finance, Dr Khaqan Najeeb, said that it was not entirely correct to say that Pakistan has done 22 programs with the IMF. Most of the programs the country signed onto with the IMF were abandoned after a few tranches and never completed.
The experience of completing the 2016 program showed to us that success of an IMF-backed programme hinges on a country’s preparation, ability to interpret data, and competence of technical analysis -- all dependent on high-calibre and trained professionals and a thoroughly prepared team, he added.
He mentioned that at times design of Pakistan’s programmes with the IMF remained overshadowed by expediency and remained short of tackling the fundamental issues facing the economy.
However, in the short run, completion of the current program is essential. As things stand, with gross financing needs crossing $28 billion for FY2022 alone, the IMF's seal of approval seems a prudent way forward.
"The IMF is the lender of last resort. Its approval ensures access to a host of multilateral and other international financing options at cheaper mark-up. IMF's continuity can remove uncertainty and help Pakistan finance the short term,” he maintained.
He expressed his opinion that the IMF may be also more thoughtful in its calibration. Inflation today is an economic and social concern. An emphasis on a large indirect tax effort of Rs343 billion, in addition to Rs750 billion of new tax policy measures already taken at the start of the program in 2019, does carry a certain burden of price hike. A substantive increase in petroleum levy and a full pass-through of energy prices at a time of double-digit inflationary pressure, doesn’t paint an inspiring picture. This coupled with an oil price moving to $100 a barrel is going to be painful for the low earners, he observed.
Dr Khaqan felt where one had always argued for the sovereignty of Parliament while negotiating the program for Pakistan with the IMF; that space seems to have been squeezed. The submission of laws to Parliament as a condition of the MEFP is now more of an approval by Parliament as seen in the case of the two current bills – the mini-budget and the State Bank of Pakistan autonomy law.
When asked about the SBP bill, he commented that legislative changes need a wider political buy-in. All concerned must realize ownership of the SBP bill is crucial for a truly-sound functioning SBP and strengthening its capacities.
No one can argue against the operational independence of a central Bank within the purview of the state. Broad-based debate on how to best accomplish this independence can actually be good, not hurtful.
It may help in shaping a bill with necessary changes as a truly sound piece of legislation. But with the short time remaining before the IMF Board date, it may have to be done relying more on expediency, he concluded.