ISLAMABAD: The government has agreed to legislate the issue of granting the State Bank of Pakistan (SBP) Bill “total autonomy”. And has called a National Assembly session for Monday to table a bill in this regard. The federal cabinet has approved the draught bill on central bank autonomy. Which will now forwarded to the National Assembly for consideration as an Act of Parliament.
The lower house of Parliament will meet at 4 p.m. on Monday, according to President Arif Alvi. The topic of making the SBP more independent of the federal government has sparked a heated debate. Mainly pursue inflation rather than economic growth. Since the International Monetary Fund (IMF) made greater autonomy for the State Bank one of the conditions for releasing tranches of its $6 billion loan. Many have expressed concerns about the loan’s long-term effect. Not only on the economy but also on the country’s overall sovereignty.
Giving up the government’s right to borrow from the central bank to keep a lid on deficit financing by printing new money. Extending the SBP governor’s term from three to five years (renewable for another term). To minimise political interference and bring it closer to international practice. And providing immunity to SBP officials are among the major changes for autonomy. The pros and cons of the proposed reforms have sparked a lively debate. Many opposed to the reforms argue that they would remove the central bank’s responsibility while giving it too much control.
They also argue that eliminating the reference to “growth” from the current SBP Act’s preamble would cause. The SBP concentrate solely on price stability and disregard growth. The government’s inability to obtain loans from the SBP has also criticized. Contributing to a greater dependence on commercial bank borrowing.
Those in favor of greater autonomy, on the other hand, argue that such measures would enhance transparency, make monetary policy more competitive, and eliminate political control. This independence would imply that the government’s borrowing limits would force it to be fiscally responsible.
They deny that there will no transparency since the governor will expected to report to Parliament on the bank’s goals, monetary policy, and financial stability on an annual basis. The PML-N has stated unequivocally that it would oppose the government’s decision. Last week, former Sindh governor and PML-N leader Mohammad Zubair expressed his party’s opposition to the bill, saying that it would not be passed. The bill, according to Zubair, is implemented at the request of the IMF, and once passed, the premier, finance minister, and Parliament will lose all power over the SBP. According to him, the SBP chancellor, deputy governors, and executives, including former officeholders, are immune from FIA and NAB inquiries under the new bill.