Former finance minister Miftah Ismail is of the opinion that the incumbent government instead of strengthening the State Bank of Pakistan has given ‘dictatorial powers’ to the SBP governor.
Speaking to Narratives Media, the PML-N leader said that the federal government has not done any legislation for the autonomy of the state bank but has only worked to empower one individual.
“What the PTI government has done in the name of SBP autonomy is something off the beaten track,” he said adding that the governor enjoys more powers than even the elected ministers.
“No minister can appoint a 17-grade officer, but the SBP Governor has been empowered to pick his own deputy governors, and the federal government has no option but to appoint his nominees,” he elaborated.
Criticizing the SBP governor, Miftah said Reza Baqir is already known for his solo-flights and not consulting with Finance Minister Shaukat Tarin on important decisions.
“Even with the former finance minister his attitude was the same. Despite this known fact, the latest amendment in the SBP Act has dissolved the coordination board between the fiscal policy and monetary policy and instead called for establishing close liaison between the governor and finance minister through mutual agreement which is impractical,” the PML-N leader added.
He cited that while the finance minister had opposed the dissolution of the coordination board in the prolonged talks with the IMF aimed at the resumption of the $6 billion loan programme, the SBP governor got the coordination board dissolved using the IMF as he had wanted.
“Now the central bank’s role has been reduced mainly to controlling inflation, while the objectives of playing a role in the development and economic growth of the country are gone. Export refinance will no longer be conducted by the SBP, but a separate bank would be established for this purpose,” he maintained.
Taking a jibe at the government, Miftah said that the kind of law-making the government has done has reduced the role of the government officials at the SBP Board of Directors to next to nil.
“The influence of the IMF over the central bank has been further strengthened,” he said.
“The State Bank of Pakistan is the bank of the nation. However, the government cannot take loans from its own central bank. This is something deceptive. This amendment is against Pakistan’s national interest,” Miftah added.
Criticizing the new legislation, he said that the law has withdrawn the day-to-day powers of the execution of the policy from the board of directors — which comprises the government officials — and placed it in the hands of the executive committee which includes the SBP governor, deputy governors and executive directors.
“Everyone in the committee would be at the mercy of the governor, as he has his hand-picked men as its members. How can his appointees go against him? The quorum of the committee would stand completed with only two persons, including the governor himself, and one executive director. This means the individual governor is now more powerful than the entire institution of the State Bank,” he explained.
Another damaging amendment pertains to empowering the SBP to give confidential data to foreign institutions, he said.
“So far the practice has been that the government used to give such data to foreign institutions under the Financial Action Task Force (FAFT) obligation and as a prove that the nation is working in compliance with the anti-money laundering (AML) and countering financing of terrorism (CFT) laws.
“The foreign institutions used to seek such data through foreign offices and the finance ministry shared it only after consulting with the law ministry. There was no one man show at all in the past. Now this has all changed,” the former finance minister added.
