Independent central bank
READERS may remember there was much hue and cry over the amendments to the State Bank of Pakistan Act, 1956, that were legislated in January 2022. The present government, then in the opposition, had resisted it tooth and nail but let the law pass — thanks to establishment pressure — not necessarily as a reform measure but an obligatory IMF condition. The government’s concept of the central bank’s independence should be taken with a grain of salt as the government itself is not independent of the establishment. Despite this conundrum, the SBP has become relatively more independent after these amendments. Since the raison d’être of central bank independence lies in the fact that the higher the degree of independence, the better the control over inflation in the country, the independent central bank must cogently justify the presence of high inflation. The independent SBP is required to submit three reports to parliament: the governor’s annual report on SBP performance, a half-yearly report on the state of the economy, and an annual report on financial stability.