SHAFAQNA PAKISTAN (Shia News Agency)
With the recent excessive money creation and consequent high inflation, and the toeing of government line by the State Bank of Pakistan (SBP) in its analysis of macroeconomic trends, there has been a renewed debate in financial circles about the autonomy of SBP or lack thereof. The Letter of Intent signed by Advisor Finance and SBP Governor in concluding a recent stand-by arrangement with IMF makes a pointed reference to the desirability of enhancement of SBP autonomy. It raises a fundamental issue as to whether strengthening of autonomy requires changes in laws or in enforcement/practices/attitudes or both. Accordingly, it is imperative to revisit this question, both in a historical and legal perspective and in the context of the ground realities standing in the way of achieving operational SBP autonomy. After Government has presented a bill in senate for the autonomy issue but the International Monetary Fund (IMF) is said to have reservations over a government bill seeking greater autonomy for the State Bank. “The State Bank of Pakistan (Amendment) Act, 2014” introduced by the government in the National Assembly early this month was not sufficient to provide full autonomy to the central bank in line with international best practices” reported dawn. However it is encouraging that the government has signalled its renewed resolve to the IMF to pass legislation updating the State Bank’s autonomy. The IMF has been given a commitment that this will be done by June, and the new legislation will include language to bring it in line with international standards. Given the powers that the State Bank exercises, such as management of the exchange rate, the conduct of monetary policy, auctions of government debt and regulatory oversight of banks, there is a feeling that in the wrong hands these could do some damage to the sitting government if used for political point-scoring. Governments have historically resisted an autonomous State Bank for these reasons. But such fears could be removed by filling the top slots with proper appointments without any political allegiance and tightening the regulations.
pakistan.shafaqna.com
