Ali Afzal

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Question 1
Answer:
Introduction: SBP and its Autonomy

State Bank is a financial institution which is responsible for overseeing the monetary system and
policy of the country. It keeps with its aim the “the growth in the best national interested of a
country”. Moreover, for troubled commercial banks it is the lender of the last resort.

Proposed Amendments in the State Bank of Pakistan Act:

The major changes in the Preamble

The phrase of “….. best national interest” has been removed. And that according to many
prominent economist is due to the pressure and obedience to policies of International Monetary
Fund (IMF).

The objective of the bank

 As per new clause inserted, the 'Price Stability' will be the primary objective of SBP.
And that supporting economic policies of the government will be a "tertiary objective"
now.
 The monetary policy decision, would have no considerations to "support the general
economic policies of the federal government".

Role of the Bank

• As per new bill the Bank shall not extend any direct credits to or guarantee any
obligation of the government, or government-owned entity or any other public entity.
• New bill holds that there would be purchase of government securities only in the
secondary markets only by and not the primary market by SBP.
• The bill requires the government to pay its debt owed to the central bank at the initial
schedule agreed and no rollover will be allowed.
• The new bill has given State Bank full authority to acquire, hold and dispose of any
tangible and intangible property.
• As per new bill, SBP will provide refinance facilities only to the financial institutions.
• SBP will provide short-term facility to any commercial bank, given that central
government provides guarantees to the SBP for providing such loan.
• There would be no legislation without SBP’s consultation in light of section 46b
subsection 8.

SBP accountability
This is the most debated part of the amendment bill. Those oppose the bill argue that the threat
of unaccountability will loom larger.

• As per bill, the Governor is required to submit an annual report before the honorable
Parliament on overall performance of the Bank. That will include the objectives of SBP,
the monetary policy conduct, and picture of overall health of economy and financial
system.
• Moreover, the Monetary and Fiscal Policies Coordination Board will also be terminated.
That according to the bill is to avert political influence in the monetary policy.
• Most importantly, the State Bank's governor, deputy governors, its executives, and
board and committee members cannot be investigated by NAB or FIA -until in office.

SBP employment rules

Job security is prioritized and amendments have been suggested accordingly, which again are
criticized on some valid grounds.

• Increase in the tenure of the governor, deputy governor, and non-executive members
from three to five years.
• They shall be allowed to serve the offices of SBP for another term.
• Government can remove them offices only in very certain and purposeful conditions.
Such circumstances are mentioned in Article 13.
• Even the Governor will have to give recommendation while removing Bank’s deputy
governor
• SBP governor will remain the chairman of the board.

The Principal objective:

As per the amendment bill, price stability is the major objective of the bill.
Critical Analysis of the Validity of the Bill:
The neoliberals preach the correlation between low inflation and central bank
independence. And the autonomy is their so-called magic wand to correct all that is not
going good.
The present government is facing severe criticism from opposition parties to general
public. The basis of the criticism is mounting – and in many cases double digit-
inflation. The government wants to address this issue. Its policymakers have suggested
the autonomy of SBP, which are they are (allegedly) taught by IMF.
The most important question is if the autonomy can solve the issue of inflation. The
point is state bank can only regulate and conduct supply and demand of money.
However, it has no powers to keep the prices of food and energy on the track. There, are
many more issues related to the inflation.
There are disruptions, shortages in agricultural commodities. What SBP can do to that?
What SBP can do to the rigid cross border barriers? They are hoarders and profiteers
who deliberately keep the prices high. SBP cannot ensure that such individuals work in
the greater social interest. The profiteering in month of Ramzan is the best example of
this threat. And what if the inflation targets are not achieved – there is no autonomy!
Again it would be a disaster.
In such circumstances, the growth is sure to suffer. Now that the cries of
Parliamentarians will paid no heed, the concerns of general public are supposed to be
undermine.
Finally, the government and authorities must realize that “a country needs its own
formula to run, which are according to the needs of public. Following dictations and
copying other countries, and believing that our all issues will be resolved is self-
defeating strategy”.

Question 2
Answer:
Poverty in Pakistan: Numbers and Policies
Poverty is the most serious issue. According to Gandhi “it is worst form of violence”.
And Marcus Aurelius goes on one further step to suggest that “poverty is the mother of
the crime”. Addressing poverty, thus, has been the major goal of every government. No
doubt, their ability to address the issue has been limited.
Defining Poor:
According to World Bank, “every individual living below than $1.90 per day is
considered poor”. And all those living above $1.90= 264.556 PKR a day do not fall in the
category of poverty.
Poverty in Pakistan:
The poverty statistics in Pakistan have suffered serious issues. Most of the time they
have been either postponed, tempered or presented to suit the political agendas. Afshan
Subohi, for instance, claimed the same in her article in Dawn newspaper.

Policies Adopted by Government to Alleviate Poverty:

• The Decentralization Plan revealed in March 2000, which focuses on “people‐
centered, rights and responsibility‐based, and service oriented” government
structures
 • Khushhali Bank 2000 to benefit poor
• Pakistan Poverty Alleviation Fund
• The Zakat and Ushr Department was established in 1980, which was based on
Islamic traditions.
• Benazir Income Support Programme (BISP)
• Ehsaas Kifalat Programme
These and many other initiatives have been taken by different governments to address
poverty.
Net Result:
• According to Business Recorder, 40% population in Pakistan is poor
• The rural poverty is more severe than that in the urban.
• Pakistan ranks at 154th in the Human Development Index
Critical Evaluation of Poverty Dilemma in Pakistan
• First, the policies are vague. Ambitious and ideal targets are set in policies. This
practice should come to halt. Realistic goals and approaches should come into
practice
• There should be focus on growth oriented initiatives.
• Need to realize that Ehsaas Kifalat and BISP AMD such initiatives are palliatives
not the source of long run growth
• Data should be accurate – which has been the issue with Pakistan. Data in our
country has not been very reliable
• Human development should be the primary objective. That is investing in
education and skill-development of poor individuals.
• Education is multidimensional solution to myriad issues such as poverty and
growth in a country. Education should be priority of government.
• Government institutions should be poor-friendly. That is the cries and demands
of poor mist be paid equal attention to that of the rich.
• There is a need for long run poverty alleviation formula.
• Participation of poor should be encouraged in policymaking. Through phone
calls, surveys or such initiatives their participation can be encouraged.
Conclusion:
Poor do not know the basic rules of economics. Or how the ministries work.
All they want is the two time meal with dignity. The responsibility lies with the
government to ensure that the divinity of poor is not violated.