SBP to get autonomous status as parliament passes amendment bill

ISLAMABAD: The lawmakers on Wednesday gave an approval to amend the Banking Services Corporation Ordinance Bill, 2001, in a joint session of the Upper and Lower houses.

The bill not only weaken the Finance Ministry’s control on the State Bank but also cleared one of the major hurdles to revive a $6 billion International Monetary Fund package.

The government members and its allies in the National Assembly and Senate voted in favour of the bill. Another bill titled “SBP Amendment Act 2021” is pending with the government and it is still unknown when the government will present it before the Parliament.

If adopted, the bills will reduce the Finance Ministry’s oversight of the State Bank of Pakistan by removing its nominee on the central bank’s board and fully meet the IMF conditions.

The Finance Ministry didn’t respond on the bill; however, Adviser to the Prime Minister on Finance Shaukat Tarin in a media talk on Tuesday admitted that the IMF conditions were very harsh but, at the same time, mentioned that those who signed the agreement with the IMF should be held responsible.

“I can’t do anything because we (the government) already signed the agreement and there is nothing I can do to roll it back, the maximum I can do is seek some concessions and relaxations from them,” he said.

Sources in the Ministry of Finance said Tarin has been able to convince the IMF staff to significantly alter the SBP amendment bill that former finance minister Dr Hafeez Shaikh and SBP Governor Dr Reza Baqir had committed with the IMF ahead of $500 million disbursements in March this year.

The Clause 24 A of the Amendment Bill said: “No act or proceeding of the board or the committees of the board shall be questioned on the ground only on the existence of any vacancy in or any defect in the constitution of such a board or committee thereof.”

In the Substitution of Section 28, it also said: “No suit or other legal proceedings shall lie against the State Bank and the bank or any director or officer of the State Bank and bank for anything, which is in good faith done or intended to be done in pursuance of this ordinance or of any rules, regulations or orders made thereunder.”

The passage of the bill will help the government clear a hurdle towards a deal with the IMF for resuming the Extended Fund Facility and pave the way for the sixth staff review after which $500 million tranche request will be presented in the IMF board meeting.

The loan is a necessary cushion for the country, which has seen imports swell, as it emerges from the Covid-induced disruptions and facing inflationary pressures.

According to the State Bank of Pakistan, the rupee depreciated 10 per cent in the last five months because of the rising trade and current accounts deficits.