The government has been facing much opposition recently, on the recent SBP Amendment Bill, 2021. However, on the 17th of March, the Finance division of the government decided to reply to the criticism, clarifying things for the critiques.
Read More: Government proposes a fully autonomous SBP
This is after the federal government decided to grant full autonomy to the State Bank of Pakistan (SBP) as it was one of the prerequisites to the Extended Fund Facility for release of around US$500 million.
The government bypassed the CCLC, and the cabinet requested to (i) waive, in consideration of the urgency, the condition of submitting the draft State Bank of Pakistan (Amendment) Bill, 2021 to the CCLC; and (ii) approve the Bill for introduction in the Parliament in terms of Rule 16(1)(a) read with Rule 27 of the Rules of Business, 1973.
Accountability
Recently, Transparency International Pakistan (TIP) lodged a complaint with the Prime Minister against the proposed amendments under the said State Bank Amendment Bill. The main issue most critics have is the lack of accountability for the executives at the central bank of the country.
The SBP Bill states that the only accountability is, when “the Governor shall submit an annual report before the Parliament regarding the achievement of the bank’s objectives, the conduct of the monetary policy, state of the economy and financial system.”
The TIP mentioned, “There is no accountability for SBP in case the bank fails to ensure price stability.” It also highlighted that even the Ministry of Finance was opposing some of the amendments including the SBP governor as chairman of the board “but eventually accepted it”.
Similarly, senior anchor Mohammad Malick also did a show on this and criticized accountability. He said, “It is the first legislation of its kind where the FIA and NAB have been mentioned as the organizations from which the entire bank has immunity”. He added that neither the parliament nor any legal department can question the bank. He said that none of the central banks around the world are that autonomous.
کروڑوں روپے کی تنخواہیں ہونگی پارلیمان کے سامنے جوابدہ نہیں سب خود فیصلہ کریں کریں گے شرح سود کا پہلے ہم نے دیکھا ہے جو گورنر صاحب نے کیا ہے ۔محمد مالک
@MalickViews#StateBankofPakistan @MediaCellPPP @PTIofficial @pmln_org
#RezaBaqir @SajjadBhatti @humnewspakistan pic.twitter.com/u4XgKkMIvT— Breaking Barriers With Malick (@ViewsWithMalick) March 14, 2021
The finance division replied to the accountability allegations on 17th March saying that “the indemnity to the officials and staff members of the central bank from legal challenges on any actions taken in good faith is quite common in the central bank laws”.
The ministry added that is considered an international best practice, and it allows the officials and the staff of the central banks to work unbiasedly. It ensures the functional autonomy of the said personnel.
The statement reads, “A review of 20 central bank laws across the globe including SAARC countries (India, Bangladesh, Sri Lanka, Bhutan, Nepal, and the Maldives) shows that specific provision of indemnity to the senior officials and staff against actions taken in good faith is aligned with international standards.” This rebuts Mr. Malick’s argument that no other bank around the world does it.
The statement then clarified that bodies like NAB and FBR will have the jurisdiction as before, but unlike before, the SBP board’s approval is now required to initiate any proceedings.
On the argument by the critics that informing parliament via annual reports is not accountability, the government replied that the clarification of SBP’s objectives automatically ensures that there is accountability resting upon SBP’s success in achieving targets.
In addition, according to the statement, the parliament may require any senior official to attend the session for additional amounts of time even after the report is produced before the house. This is part of the accountability process that is followed internationally as well.
Sharing of Financial Data
The government also faced backlash on the clause as stated by anchorperson Mr. Malick, who said, “State Bank now has the legal authority to share confidential and non-confidential financial information to whomever it wants.”
To this, the Finance division of the government replied via the statement saying, “it is a misconception that SBP will be empowered unabatedly through the proposed act to share financial or non-financial private information with any entity, particularly outside the country.”
The finance division clarified that for such exchange, Memorandum of Understandings (MoUs) are signed, and it is a common practice internationally that central banks enter into MoUs. According to the statement, such sharing is important for effective supervision of financial institutions across jurisdictions.
Read More: SBP to hold rate as economy battles inflation and COVID
The statement said that as per the amendment SBP cannot enter any MoU without the approval of the federal government.