‘New bill renders SBP officials above law’

ISLAMABAD: The government has proposed to grant complete indemnity to the governor, the deputy governor and board members under the proposed State Bank of Pakistan amendment bill 2021, where NAB or FIA could not initiate proceedings against them on actions taken in good faith. “No action, inquiry, investigation or proceedings shall be taken by NAB, FIA or provincial investigation agency, bureau, authority or institution by whatever name called without prior consent of the Board of Directors of State Bank”, the proposed SBP amendment bill 2021 reads out.

The SBP amendment bill 2021 also proposes inflation targeting, doing away with quasi fiscal intervention on directives of the federal government, abolishing of Fiscal and Monetary Coordination Board and complete indemnity from NAB or FIA investigation.

However, Pakistan’s independent economists have opposed these measures arguing that such autonomy would render SBP high-ups above the law and the Constitution of Pakistan. Former finance minister and renowned economist Dr Hafeez A Pasha said on Saturday that the State Bank took a number of good to combat Covid-19 pandemic, as they came up with stimulus packages to avoid bankruptcy of different firms. If the proposed so called autonomy is granted, then the SBP will not provide such stimulus packages when required for moving the wheel of national development, he added.

He said that more than required autonomy proposed for the SBP is not good omen for the country. He said that on the dictation of IMF, inflation targeting will not serve any purpose because when the government exceeds its budget deficit it will be left at the mercy of baking sector who will dictate the interest rates. He said that there was need of balancing act on this issue.

Under existing SBP Act 1956, every [person in the service] of the Bank shall be deemed to be a public servant within the meaning of section 21 of the Pakistan Penal Code. Now it has been proposed in SBP amendment bill 2021 that no suit, prosecution or any other legal proceeding including those for damages shall lie against the Bank, Board of Directors or member thereof, Governor, Deputy Governors, and any other officer or employees of the Bank for any act of commission or omission done in exercise or performance of any functions. They shall not be liable for any act of commission or omission done in good faith and in case of any proceedings, they shall be indemnified by the Bank which shall bear all the expenses thereof, till final decision of the case.

In light of international best practices and domestic experiences, legal framework of SBP is being amended to:

(i) Clearly define the objectives of SBP to improve its accountability

(ii) Outline SBP’s functions in line with its objectives

(iii) Provide necessary financial resources to help achieve objectives

(iv) Increase functional and administrative autonomy of SBP

(v) Improve transparency in operations of SBP

(vi) Strengthen accountability by making oversight functions stronger and enhancing

The SBP is being provided with sufficient financial resources so paid up capital and general reserves would increase to 8pc of the monetary liabilities of the Bank through retention of 20pc of distributable profits each year. The General Reserve is to be used only for increasing capital or cover losses. In that case the Federal Government would transfer to the Bank necessary amount in cash or negotiable instruments to restore the paid-up capital. For distribution of profits of SBP, the approval of government is not required. No new government borrowing will be allowed. The quasi-fiscal operations, defined as monetary actions taken on behalf of the government are not allowed. However, refinancing facilities, which SBP has used to support access to credit is still allowed.

On proposing to abolish Fiscal and Monetary Coordination Board under the propose bill 2021 states that Governor and Minister of Finance to establish liaison and shall keep each other fully informed on all matters which jointly concern the Bank and the Finance Division.

Former economic adviser of Ministry of Finance and Dean NUST Dr Ashfaque Hasan Khan recalled statements of founder of Pakistan, Quaid-i-Azam Mohammad Ali Jinnah where he declared the central bank as strategic asset of the country. He said that the autonomy should be proportionate with accountability as just submission of a report to parliament will not serve the purpose of real accountability.

He said that the monetary and fiscal coordination board should not be abolished as it provides forum to ensure coordination for achieving higher growth trajectory pre-requisite to fight unemployment or increasing poverty.