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Concession on SBP board appointment result of negotiations with IMF: Hammad Azhar

18 Jan, 2022
Hammad azhar ddressing a joint press conference with Fawad Chaudhry after the cabinet meeting.
Hammad azhar ddressing a joint press conference with Fawad Chaudhry after the cabinet meeting.

ISLAMABAD: Federal Minister for Energy Hammad Azhar said on Tuesday that concession regarding the appointment of the State Bank of Pakistan (SBP)'s board by the federal government was the "result of negotiations" with the International Monetary Fund (IMF).

His statement comes the day it was learnt that the IMF board would meet on January 28 for Pakistan's sixth review of the Extended Fund Facility (EFF).

Addressing a joint press conference with Federal Minister for Information and Broadcasting Fawad Chaudhry after the cabinet meeting, Azhar said that SBP's board members will be appointed by the federal government, adding that the board can remove the governor as well.

Talking about the "tenure security" of SBP's governor, he said that the rule was present for the last fifty years. "It is still present and there is nothing uncommon about it," he emphasised.

"Tenure of security is also present in other regulatory authorities like Ogra, where chief can be appointed and removed.

"We have applied the same formula in SBP," he said.

Explaining why the central bank's autonomy was important, he said available data globally shows that when central banks are independent, sustainable economic progress takes place.

Criticising the previous governments for their efforts to undermine the SBP's autonomy and work, he said anyone could influence the exchange rate in the past.

"To show economic growth during the last year in government, political parties in power focused on printing excessive money which eventually impacted inflation," he explained.

The minister emphasised that the law to ensure SBP's autonomy was important.

Talking about the Pakistan Muslim League-Nawaz (PML-N)'s alleged interventions to give away the SBP's control, he said that the party also passed a bill in this regard in 2015. The bill, he said, reads: "The role of state bank of Pakistan has been strengthened further by substituting the federal government’s approval wherever required to the [SBP] board approval."

Criticising the PML-N's 2015 bill, the minister said that while all SBP board members will be appointed by the federal government, PML-N virtually gave away everything to the board members.

"Now you can decide which political party tried to undermine the independence of the SBP and which party tried to protect it and made a comprehensive policy in this regard," he said.

"We brought a system that many serious economists in Pakistan were demanding," he added.

"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 said.

The opposition parties have maintained that the government's move to grant autonomy to the SBP is aimed at targeting inflation rather than economic growth, calling it an agenda of the IMF.