The federal government will retain the power to appoint the Board of Directors (BoD) of the State Bank of Pakistan (SBP).
The federal Minister for Energy, Hammad Azhar, spoke to reporters after a meeting of the federal Cabinet and revealed that the International Monetary Fund (IMF) has seceded the concession on the selection of the SBP BoD to the federal government after a tough round of negotiations.
He added that the SBP’s board members will be picked by the federal government and the board will also have the power to remove the latter’s governor.
Minister Azhar described the state’s authority to appoint the board as a “concession” won. In response to a query, he asserted that the rule for the SBP governor’s “tenure security” has been in place for 50 years. “It’s still there, and there’s nothing unusual about it,” he stated emphatically.
“Security tenure exists in other regulatory bodies, such as OGRA, where the chief can be nominated and removed. “We used the same formula in SBP,” he explained.
Minister Azhar clarified why the autonomy of the central bank is crucial. He said that evidence from all over the world illustrates that when central banks are independent, sustainable economic improvement occurs. He also scoffed at the predecessor governments for attempting to undermine the autonomy and functionality of the central bank, claiming that anyone could easily cause shifts in the exchange rate in the past.
He went on to say, “We brought a system that many serious economists in Pakistan were demanding. I want to make it clear that the SBP and its assets will remain under the federal government’s ownership”.
“Some political parties are engaged in politics over the issue and an explanation was needed,” he added, demanding an explanation from the opposition parties who claimed that the government has sold the country to the IMF.
Minister Azhar’s remarks come less than a day after the IMF announced to convene the next meeting of its BoD for Pakistan on 28 January for the revival of the $6 billion Extended Fund Facility (EFF). The completion of the review will make SDR 750 million (about $1,059 million) available for Pakistan, which will bring the total disbursements under the EFF to about $3,027 million.
The meeting had been scheduled for 12 January but the authorities had later removed Pakistan’s agenda from the calendar of the Executive Board.