A “possible rift” between the finance ministry and State Bank came to light once again when Finance Minister Shaukat Tarin said that if the SBP governor did not extend cooperation to the government for achieving growth objectives he would be removed.
“We will bring SBP law before the parliament to amend it if the SBP governor did not provide the required support to the government. Parliament is supreme and it can bring any change in the law. We don’t think that the need will arise to fire the governor from his office,” Shaukat said while briefing reporters at Punjab House in Islamabad on Tuesday.
Federal Minister for Energy Hammad Azhar also told journalists on the occasion that the government would introduce the average gas tariff bill in the parliament soon and this bill would be tabled next week.
He said that the existing slabs would remain intact and no change would be brought in these slabs. With this change in average tariff, the gas prices could go up by 30 percent but it would be done in a gradual manner comprising of many years.
There will be no upward adjustment in gas tariff in one go, he added. He further said that the country possessed gas reservoirs for 10 years and a 30 percent network was being run on LNG.
“After two to three years, the situation will become more difficult” he admitted and added that there was a need to devise a strategy now so the roadmap would be finalized to tackle the arising situation.
Minister for Finance Shaukat hoped that there would be no need for taking any extreme action related to SBP Governor. “We don’t expect that this situation will ever arise”, he added.
The federal government would appoint eight members of SBP’s Executive Board – which would be responsible for the affairs of the central bank.
He said that the government wanted to make SBP as an autonomous body having full independence to function for devising monetary and exchange rate policies.
The minister said that granting autonomy to the SBP was the demand of the IMF but it was also the manifesto of PTI for providing independence to all state institutions.
He dispelled the impression that the SBP would go out of control of the government as the SBP Governor would be appointed by the government and out of 10 members of the Board of Directors, eight members would be selected by the government.
Shaukat was of the view that the mini budget known as the Tax Laws Supplementary Bill would not add misery in the lives of the common people as most of the sectors where the GST exemptions were withdrawn, would be provided refunds and input adjustments.
The minister said that the mini-budget was aimed to ensure documentation of the economy by removing distortions in the tax system.
He said that the IMF had demanded tax measures of Rs700 billion but they convinced the IMF to restrict taxation measures to just Rs343 billion. Of that, the taxation measures of Rs280 billion were taken in shape of input adjustments and refundable and this whole exercise was aimed at documentation of the economy.
There are only Rs71 billion taxes imposed on luxury goods, he said and added that the government also allocated Rs 33 billion for provision of subsidy.
He said that the government could not backtrack from documenting the economy. The government protected fertilizer, pesticides, tractors, agriculture equipment and provident income from slapping tax on the IMF demand.
On the SBP’s autonomy, he said that the governments in the past obtained Rs6,000 billion from the central bank at zero interest rate.