Press Release – Webinar on “The State Bank of Pakistan Amendment Act 2021”

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Press Release

“The State Bank of Pakistan Amendment Act 2021”
February 21, 2022

The Centre for Strategic Perspectives (CSP) at the Institute of Strategic Studies Islamabad (ISSI) organized a webinar on “The State Bank of Pakistan Amendment Act 2021.” The guest speaker at the talk was Dr. Ishrat Husain, Former Governor, State Bank of Pakistan. The talk was moderated by Dr. Neelum Nigar, Director CSP, ISSI.

In his welcome remarks, Ambassador Aizaz Ahmed Chaudhry Director General ISSI said that there are multiple shades of opinion with regards to the amendment act with some linking it to the conditionalities put forth by the International Monetary Fund (IMF). While some remain highly critical of this move, others argue that it’s not the IMF program itself but an important step to ensure independency of the central bank.

Dr. Ishrat Husain while shedding light on the State Bank of Pakistan amendment Act 2021 stated that State Bank act since 1960 has been amended several times till 2020. As the conditions change it is important to try to adapt the central bank according the circumstances instead of reaming isolated to what is happening internationally. Dr. Husain highlighted that around the world, central banks have been given autonomy and operational independence in order to carry out their functions without any interference from the parts of the government. However it does not mean autonomy from the government but the idea of autonomy is within the government.

On the issue of IMF, Dr. Husain was of the view that the IMF program in Pakistan has become highly contentious and controversial. The question of the IMF dictating the central bank should be taken in a larger perspective. The board of the IMF looks at the internal working of the IMF and does not concern itself with pointing directions to any member country, unless that country enters into an agreement with the IMF for financial assistance. Hence, it is imperative to correct the misconception that the central bank will become subservient to the IMF.

Further in his remarks Dr. Hussain stressed that the act had a lot of vagueness and had to be clarified. He highlighted multiple areas of motivation behind the set of amendments including; clarity of objectives; change and clarity in functions of the central bank; development financing to be done through federal budget resources instead of the State Bank; financial resources and capital strength; functional and administrative autonomy; audit by the Auditor General of Pakistan; transparency and governance in functioning and isolation of external influence in decision making and directives.

Chairman BoG, ISSI Ambassador Khalid Mahmood the State Bank Amendment Act 2021 has been under a lot of talk and controversy and to address the issue it is important to understand the trigger point and the reasoning behind the amendments introduced in the act.  He was of the view that the basic issue is with respect to the autonomy versus accountability. Government has the right to lay down the policy while the State Bank has the right to carry out the policy autonomously without any political interference and due accountability. Towards the end, he extended his vote of thanks to the speaker and the participants.