Dismissing the notion that International Monetary Fund (IMF) wants structural reforms in the central bank, State Bank of Pakistan (SBP) Governor Reza Baqir has said that these legal amendments have been in the works since 2015.
The central bank governor told reporters in an online meeting that granting autonomy to the State Bank of Pakistan (SBP) will allow the institution to overcome inflation, ensure sustainable economic growth and avert a recurring foreign exchange crisis. Baqir said once the legislation is passed, Pakistan would not need to keep turning to friendly countries and international financial institutions to stave off a recurring balance of payments crisis.
“The central bank’s autonomy will help Pakistan get rid of the boom-bust cycles we endure after every two to three years due to the short-term policies,” Baqir told reporters, saying the autonomy bill would next go to parliament for a thorough discussion on its pros and cons.
“We want parliament to hold a healthy discussion over the legislation and only retain those things which are good for the country,” he said.
Listing the three main objectives of the proposed legislation, including price and financial stability, and promotion of the development and growth schemes of the government, he said these key performance indicators would allow the country’s parliament to hold the central bank accountable. “The language for these objectives in the current law is weak and vague, but now it is clearly written to support the government’s policies,” he said.
Baqir said the government would make all 15 key appointments in the bank, adding that the governor, according to the proposed law, would brief the national parliament once a year over progress in specified areas.
Other than that, he said, the central bank would not directly lend to the government which would help introduce “self-discipline” in the overall economic affairs of the government and provide impetus for institutional reforms in the country. He also clarified that the bank would continue its refinancing facilities for exporters and industries with better mechanisms.
A debate around proposed amendments to govern the State Bank of Pakistan has picked up momentum in recent days, with critics saying it would hand over control of the economy to multilateral lenders whose main priority would be to ensure debt repayments, rather than leading to indigenous growth that would create more jobs, and create overall better infrastructure for the people of Pakistan. Proposed amendments to the central bank came after an announcement by the IMF last month that it would resume a $6 billion rescue package that has been suspended for over a year. agencies
