Central bank under fire in Senate
Thursday, November 13, 2008
By Mumtaz Alvi
ISLAMABAD: The State Bank of Pakistan (SBP) came under scathing attack on Wednesday from the treasury and opposition lawmakers for allegedly undermining parliament.
The legislators feared that the latest SBP move to hike the interest rate was a part of harsh IMF conditions prior to granting loan. The legislators described the steps taken by the SBP so far too little and too late in view of the faltering economic indicators.
Leader of the House in the Senate Mian Raza Rabbani billed the central bank’s decision to increase the interest rate as wrong, insisting it should have waited till the conclusion of the ongoing debate on the economic situation.
The enraged senators blamed Pervez Musharraf and former prime minister Shaukat Aziz for the present economic morass and called for their accountability, along with their economic advisers.
Treasury and opposition lawmakers, while opposing the proposed sell-off of the Qadirpur gas field and Dadu Sugar Mills, said the sale of such strategic assets would ruin the country’s economy.
It was proposed that a parliamentary committee be formed to suggest how to steer the country out of the present economic crisis instead of approaching the IMF. On the third day of the debate, the lawmakers fiercely opposed the government’s alleged hasty decision of going to the IMF and asked politicians, bureaucrats, generals and expatriates to bring their money from abroad. They claimed that a small chunk of it could help Pakistan overcome the economic crisis.
Some of the speakers charged the SBP was functioning like a state within a state and that too on foreign diktat. “It appears by listening to senators that what the IMF is giving for cure is not a bitter pill but poison,” remarked Jan Jamali.
The government was cautioned against increasing the gas tariff as recommended by the OGRA and one senator said such cruel actions could lead one day to a civil war in Pakistan. An ANP senator complained that though his party was part of the ruling coalition yet it was not taken into confidence on this particular development, which would not serve any purpose in the wake of falling prices of POL and other commodities.
Lawmakers across the aisle also strongly differed with the SBP governor’s claim that inflation was still 25 per cent and said it would not be more than 20 per cent, adding that there was no justification for this uncalled for increase.
An opposition senator, while opposing the sell-off of national assets, proposed the elimination of the Ministry of Privatisation, basing his argument on the proposed privatisation of massive revenue-generating Qadirpur gas field and the state entities sold out in the past.
As the House reconvened 40 minutes behind schedule, chaired by Jan Muhammad Jamali, former finance minister Ishaq Dar on a point of order protested over the increase in the interest and discount rate, saying this was done at a time when the Senate was debating the national economy and businessmen were opposed to hike in the interest rate.
“Today, the monetary policy has been changed. Who is doing this? There should have been consensus on this delicate matter. This step runs contrary to the country’s economic position,” he maintained.
Prof Khurshid Ahmad described the move as an attack on parliament’s role and believed it was part of the IMF diktat. He said the increase would neither serve the agriculture and manufacturing sectors nor attract foreign investment. The senator saw it an anti-growth measure.
Leader of the Opposition Kamil Ali Agha alleged that the IMF conditionalities were being met, as without it, the donor agency would not give loan. “The entire world is decreasing the interest rate, whereas in Pakistan, it is being hiked,” he noted. The SBP’s measure, he believed, was like sabotaging the House. He said already two days before the start of a requisitioned session, and with a mala fide intention, the privatisation plan of Qadirpur gas field was okayed.
ANP’s Ilyas Bilour contended that industry would not survive as already several industries, such as steel and cotton, were in crisis and had registered negative growth. A member of the PML-Q like-minded group Zafar Iqbal said that such measures could further impede competitiveness of the Pakistani products in the world market.
“Those who promised to provide Roti, Kapra Aur Makaan are destroying industry and agriculture. The Senate should have been given importance, this House is not a union council,” said Pari Gul Agha of the PML-Q.
She also castigated the president and prime minister for going abroad instead of visiting the earthquake victims, who were facing hardships under the open sky. Taking part in the debate, Prof Khurshid said going to the IMF would compel the government to further tighten the monetary policy, whereas such policy was detrimental to the production sector.
“The IMF formulas have failed almost in all the developing countries and the repeat of such experience in Pakistan will wreak havoc. Rupee has been massively devalued and the IMF will seek its further erosion,” he feared.
The step of selling out profit-making entities, he warned, was a wrong one and it was like killing a hen that daily laid a golden egg. He particularly flayed the sale of the OGDCL shares, which were giving Rs 99 billion profit annually.
He said the Qadirpur gas field had a 40 per cent share in the provision of gas and was giving profit of over dollars 180 million annually and there was a possibility of increase in it in the future.
The senator also opposed the proposed sale of the SME Bank, saying that it was playing an important role in the promotion of small and medium business. He said the previous government had a major role in the present state of economic affairs, but the present regime had also failed to chalk out a strategy to handle the situation.
Prof Khurshid claimed that only 45 Pakistanis had $23 billion abroad in addition to dollar 150-200 billion held by expatriates. “These people can help Pakistan at this juncture by sending a small portion of their assets to the country,” he said.
Rabbani said that gradually the embezzlement by Musharraf and Aziz was coming to light and their economic crimes were being unearthed. He alleged that even the Ministry of Finance and the SBP were kept in the dark, when Shaukat Aziz as the prime minister had allowed more than $4 billion capital flight and had issued a series of SROs to benefit his favourites.
“Today, the national kitty is empty and the government is left with no option but to approach the IMF, a course the PPP has always been opposing,” he said. He admitted that the SBP had done a wrong thing by increasing the interest rate, instead of waiting for the conclusion of a House debate on the economic situation.
JWP’s Shahid Hasan Bugti also opposed the sell-off of the national assets and called for a check on the government spending. In this context, he made the mention of the HBL, which was sold out for peanuts and the buyer had paid first instalment of Rs 22 billion from its own pocket and then paid the remaining from the bank profit.
Tahir Hussain Mashhadi, Abdur Rahim Mandokhail, Liaquat Bangalzai and Khalid Soomro also opposed the privatisation of the Qadirpur gas field and the Dadu Sugar Mills and questioned why consumers were deprived of relief in the wake of plunge in the prices of POL, edible oil and other commodities.
went on strike in the govt of Ghulam Mustafa Khar....for a day or two (i dont remember well) and there was no any crime in the province in such duration.
