Islamabad — In its latest Governance and Corruption Diagnosis Mission report, the International Monetary Fund (IMF) has called for significant governance reforms aimed at strengthening the autonomy and operational resilience of the State Bank of Pakistan (SBP). Key among the recommendations is the removal of the finance secretary from the SBP board, the immediate filling of two vacant deputy governor positions, and the limitation of federal oversight over commercial banking inspections.
Fund calls for immediate filling of vacant deputy governor posts and changes to SBP Act for increased independence
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While the finance secretary currently serves on the SBP board without voting rights—a role introduced as part of reforms in 2022—this latest suggestion represents a further push to shield monetary policymaking from political influence. The IMF argues that full independence of the SBP is crucial, especially given its mandate over policy decisions like interest rates, which, as Finance Minister Muhammad Aurangzeb reiterated, remain the exclusive domain of the central bank’s Monetary Policy Committee. He also assured that exchange rates would continue to be market-determined, with the Pakistani rupee appreciating to around Rs282 per dollar.
Beyond structural adjustments, the IMF has urged Pakistan to fill the two unoccupied deputy governor slots immediately. Currently, only one of three sanctioned positions is occupied by Deputy Governor Saleem Ullah, leaving significant leadership gaps in areas including banking oversight, exchange rate policy, and monetary management. The acting appointment of Dr. Inayat Husain has been delayed by legal issues related to his dual nationality. A government committee has been formed to explore legal amendments that would allow dual nationals to hold such positions.
Further recommendations include revising laws to remove the federal government’s authority to initiate commercial bank inspections, reinforcing the SBP’s regulatory independence. The IMF also emphasized the importance of publishing transparent justification for the removal of SBP governors, deputy governors, non-executive directors, and Monetary Policy Committee members, thus bolstering accountability in key appointments and dismissals.
The IMF’s review mission, under Pakistan’s ongoing 37-month Extended Fund Facility (EFF) program, is expected to visit in mid-September to assess progress and review eligibility for the third loan tranche of US$1 billion. Discussions will likely hinge on the implementation of these proposed SBP reforms.
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