Institutional autonomy

There are has intense debate on the bill granting unprecedented autonomy to the State Bank of Pakistan (SBP) with a view to regulate monetary policy and control inflation in the interest of the country. These measures are said to according to international best practices but there is still uncertainty on the powers that the central bank’s governor may hold.

The government is resetting the core function to prevent political intervention in the working of the central bank. There is no denying that the SBP cannot act as a division of the Finance Ministry nor can the governor take regular directives on monetary policy, interest rates, and economic growth. But we also cannot make the SBP Governor and the Board do anything as they want since a single mistake can place the entire nation at stake.

Ideally, all levels of government – local, provincial and federal – should work in cohesion along with the private sector to reach a balance between their roles in a functional society. Rarely does one solve a problem alone but it requires joint efforts against economic and social challenges. If we are in a position of authority, we should also avoid conflicts of interests and personal benefits. This arises when the director has a business or personal relationship with a person or entity affected by the company’s activities. In case a situation arises that can affect a director’s integrity, it is essential that he discloses them or steps aside.

The prime minister should not grant a free hand to any authority particularly a vital institution like the State Bank of Pakistan.

This can also arise when director attempts to taking personal advantage of any property, information or opportunity that belongs to the company. Accepting gifts or any personal benefits from third parties constitutes as corruption that which is morally, ethically and legally unlawful. Therefore, it is the duty of the director to disclose any conflict of interest in prospective or existing transactions and agreements. There are standards that business and even political leaders need to follow. The objective is to ensure that views of business leaders are taken into consideration while forming policy.

There is problem when the government is involved in managing business enterprises. It is not the government’s responsibility nor does it have the expertise in managing bailed out companies or their assets. We have witnessed how our state-owned firms have turned into white elephants as the government could not manage them. These organizations are handed over to private contractors but they are not bound by any obligations or ethics and do not deliver results.

The prime minister should not grant a free hand to any authority particularly a vital institution like the State Bank of Pakistan. The nation’s economy is dependent on the working of the central bank. We could go from bad to worse if any decision is abruptly made affecting national economy. If the governor wields unprecedented powers, then one single mistake can erase all of the government’s efforts to revive our fledgling economy.