First, the proposed bill is ultra vires the Constitution as it regulates the legislative power of Parliament. Section 46-B (8) of the act provides that “SBP shall be consulted ex ante before any legislation related to SBP.” According to Article 142 of the Constitution, the parliament is empowered to make laws on the subjects falling in the Federal Legislative List (item 28 of the list relates to the State Bank of Pakistan). Thus, any regulation or restriction, through a sub-constitutional act, on the powers of the parliament is unconstitutional.
Second, the bill confers sweeping power on technocrats i.e., the governor of the SBP. Neither the parliament nor the government nor any investigative agency can probe into the affairs of its managers. Reportedly, the proposed Bill/Act states: “No action, inquiry, investigation or proceedings shall be taken by NAB, FIA or provincial investigation agency, bureau, authority or institution by whatever name called without the prior consent of the board of directors of State Bank.” This means an independent investigation cannot be initiated against the SBP employee. Further, they shall not be deemed to be a public servant for the purposes of Chapter IX (offences by or relating to public servants) of the Pakistan Penal Code 1860. Such immunity from investigation and the application of domestic criminal law cannot be conceived and granted in any system of law.
An independent bank may control the price and inflation, but it has to be done within constitutional parameters
Third, the government shall lose its control over the price determination of all items including oil, gas, and electricity. The government shall neither be able to get a loan or budgetary support nor could secure any bank guarantee nor seek financial support for development; the SBP will have full control over the fiscal policy and the national economy. Above all, it shall run without effective accountability or oversight by the parliament. Such a critical power or control can only be exercised by a political government that represents the will of the people. The preamble to our Constitution states, “The State shall exercise its power and authority through the chosen representatives of the people…” Thus, in our constitutional scheme, technocrats have a limited role to play. They cannot be given a role that is not warranted by the people.
Fourth, the bill says no suit, prosecution or any other legal proceeding including for damages shall lie against the bank, board of directors or member thereof, governor, deputy governors, member of any board committee and monetary policy committee, officers and employees of the bank for any act of commission or omission done in exercise or performance of any functions, power or duty conferred or imposed by or under this act provided it is done in good faith. The term “good faith” is not defined in the act. This means the employees of the SBP are given complete impunity. Again, it offends the fundamental principles of the rule of law and constitution.
Fifth, the bill is presumably pushed in pursuance of IMF conditionalities for the release of fund monies to Pakistan. Certain conditions might be necessary to ensure that the loan is returned to the IMF within a prescribed timeframe; however, any conditions that undermine the sovereignty of a state, recognized under the norms of international law, are not valid. Thus, the IMF and our government need to review their approach to economic development in Pakistan. The proposed act, in the circumstances, is seemingly a foreign agenda or tool of financial imperialism. Thus, despite Pakistan’s financial constraints and commitment to the IMF, the sovereignty of the state must be protected. The government must consider how will it secure funds to invest in education, health, and development? How will the needs for our defense be met? Blindly accepting the IMF’s terms and cookie-cutter approach could prove disastrous for the country. Thus, the government must renegotiate with the IMF ensuring parliamentary oversight and accountability of the SBP.
Finally, price stability, low inflation and sustained economic growth are laudable goals. An independent central bank might be a sine qua non to achieve these goals. However, again, ‘independence’ of the SBP cannot be prioritized over the independence of the state. An independent bank may control the price and inflation, but it has to be done within constitutional parameters and without challenging international legal norms. Any effort to improve the economy must be subject to the will of the people. The independence of the SBP may not be pursued at the cost of constitutionalism, democracy, and national sovereignty.
The writer is an advocate in the Supreme Court of Pakistan