A meeting of the Standing Committee on Finance and Revenue was held under the chairmanship of Senator Saleem Mandviwala at Parliament House today.
The committee members delved into the 500 basis-point increase in the central bank’s monetary policy rate during January-June 2023 due to immense pressure from the International Monetary Fund (IMF), and its dire implications on the national debt.
Committee members recommended a reduction in the interest rate, especially if inflation subsides.
The Deputy Governor of the State Bank of Pakistan (SBP) explained that any decision regarding a policy rate reduction rests with the Monetary Policy Committee, but hinted at future cuts in case of a reduction in inflation.
Additional Secretary Finance pointed out that a 50-basis-point increase leads to a Rs. 300 billion increase. Senator Mandviwalla said that a one percent increase would add Rs. 600 billion in debt.
The SBP Deputy Governor defended the Monetary Policy Committee’s interest rate hikes as a measure to control inflation. He argued that the move helped ease the issue of currency in circulation which has decreased by Rs. 700 billion as a result of SBP’s interest rate hikes.
The Additional Secretary Finance said that such spikes in interest rates contribute to the national debt and impede economic growth.
Senator Mandviwalla expressed concern that the increased interest rates have led to the deposit of Rs. 26 trillion in banks, suggesting that if this money were invested in the market, it could generate employment opportunities. He emphasized the need for industrial growth to strengthen the nation’s economy.
Senator Kamil Ali Agha raised concerns about the impact of various policies on unemployment and called for dialogue with the IMF to address the growing issues in the country. He warned that if Pakistan’s economic situation worsens, the government won’t be able to repay what it owes to the lender.
On a separate issue, Senator Dilawar Khan expressed concerns about the corporate sector’s fragility, asserting that commercial banks are reluctant to provide loans. The SBP Deputy Governor expressed optimism that economic improvements would alleviate such pressures.
Bank Accounts and PEPs
In a separate segment of the meeting, the participants discussed the issue of bank account opening by Politically Exposed Persons (PEPs).
It was revealed that each bank has appointed a focal person to handle matters concerning Politically Exposed Persons. Furthermore, a focal person has been designated within SBP itself to oversee related processes.
A noteworthy concern raised during the meeting was the requirement for taxpayers to request an SBP officer’s assistance in opening an account. Senator Saadia Abbasi insisted that this law must undergo amendments to simplify the account opening process, arguing that it is increasingly challenging for politicians to initiate banking transactions.
Senator Agha agreed, arguing that such restrictions infringe upon fundamental human rights and the constitution, specifically citing Article 10 of the constitution. He called for appropriate action against any officials or individuals who obstruct the opening of bank accounts.
He further questioned the lengthy process he personally faced when opening an account in Manila, a concern that was also acknowledged by the Additional Secretary of Finance. Subsequently, the State Bank officials said that they would once again direct banks to expedite the account opening process.
Source: Pro Pakistani