KARACHI, March 29, 2021: Senior Economist and a former Advisor to The Chief Ministers of Sindh and Balochistan Dr. Kaiser Bengali said that the proposed law for the so-called “independence of State Bank of Pakistan” would bring fundamental changes in the economy of Pakistan, which are dangerous for the country
Speaking at a consultation organised by Joint Action Committee at the office of Human Rights Commission of Pakistan here on Monday, Dr. Bengali said the government is doing this on the instruction from the Briton Woods Institutions.
The government representative, Finance Secretary is removed from the board of SBP which would lose government’s control over the central bank which is an arm of the state..
“It is a matter of the concern that the new dresslaw will make a permanent change in the foundation structure of the country” he remarked.
Main function of the SBP is determined in the new law is to control inflation, whereas financial stability is a secondary function and development will be a tertiary function.
According to Dr Bengali said the priority of the central bank will be to pay back loans of World Bank, IMF and Asian Development Bank. It can refuse to pay to the government and in case all reserves are exhausted, the SBP will request to the government to pay losses and must be within 30 days.
The government function will be to pay loans and for payment of loans and interest it will borrow further.
“We will be stuck in loans swamp” he remarked. Now the government will not borrow from SBP but from private banks, which will borrow from SBP.
Currently private banks are providing the government loans at higher rate that is why banks are earning windfall profits.
More dangerous is the part that addresses managing the foreign debt; i.e., prioritizes servicing foreign debt over all other expenditures. It actually mentions foreign creditors – IMF, World Bank and ADB by name!
The Bill effectively transfers decisions with respect to servicing foreign debt from the domain of the federal government to that of the State Bank.