IMF Seeks Greater Independence for Pakistan’s Central Bank
The International Monetary Fund (IMF) has recommended significant changes to Pakistan’s financial governance structure. Among the most notable demands is the removal of the finance secretary from the State Bank of Pakistan (SBP) board and amendments to laws that currently allow the federal government to direct inspections of commercial banks.
These reforms, included in the IMF’s Governance and Corruption Diagnosis Mission report, aim to reduce government oversight and enhance SBP’s autonomy, despite the fact that the federal government remains the sole shareholder of the central bank.
Why the Finance Secretary’s Removal Matters
According to existing law, the finance secretary sits on the SBP board but does not have voting rights. Previously, in 2022, Pakistan—under IMF pressure—had already removed the secretary’s voting power. Now, the IMF is pressing to eliminate the secretary’s presence altogether.
While key monetary decisions such as interest rate setting and exchange rate management are made by the monetary policy committee, the IMF believes that removing even a non-voting representative of the finance ministry will further strengthen SBP’s independence.
However, government sources confirm that the proposal is still under discussion and not yet accepted.
Vacant Deputy Governor Positions at SBP
The IMF has also highlighted concerns over two vacant deputy governor positions at the SBP. Currently, only one of the three sanctioned posts is filled, with Saleem Ullah serving as deputy governor for finance, inclusion, and innovation.
The absence of permanent deputy governors in key areas such as banking supervision, exchange rate, and monetary policy has raised alarms. Former deputy governor Dr. Inayat Husain continues to serve in an acting capacity since his tenure expired in November last year.
The IMF insists these positions must be filled immediately, as collective decision-making is essential for a functional and independent central bank.
Legal Amendments Under Review
The IMF’s recommendations extend beyond board composition. It has asked Pakistan to amend the State Bank of Pakistan Act and the Banking Companies Ordinance of 1962, which currently allows the federal government to instruct SBP to inspect commercial banks.
Section 40 of the ordinance explicitly gives this power to the government, but the IMF wants this clause removed to ensure that all supervisory actions remain within the SBP’s discretion.
Additionally, the government is reviewing proposals to allow dual nationals to serve as deputy governors, after hurdles arose in reappointing Dr. Husain. The law ministry has vetted some of these amendments, but final approval is pending.
IMF’s Prediction For Pakistan to Grow 3.6% as Government Faces Fiscal
IMF Loan Program and Pakistan’s Commitments
These recommendations come as Pakistan prepares for the IMF’s review mission in September, part of its ongoing 37-month program. Islamabad is seeking approval for the third loan tranche worth $1 billion, making compliance with IMF conditions critical.
Finance Minister Muhammad Aurangzeb recently emphasized that the government has no role in interest rate decisions and that the rupee’s exchange rate will remain market-driven. His remarks signal alignment with IMF expectations but also underline the delicate balance between sovereignty and financial obligations.
Conclusion
The IMF’s push for stronger central bank autonomy marks a crucial phase in Pakistan’s economic reforms. By reducing government influence over the State Bank of Pakistan, the lender aims to ensure greater transparency and financial stability.
However, these changes also raise important questions about national control versus external oversight. With Pakistan’s economic future tied closely to IMF support, the government’s decisions in the coming months will shape the country’s monetary independence and global financial credibility.
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