A clause in the new State Bank bill debars the National Accountability Bureau (NAB) from investigating the governor, deputy governors, other executives and the members of the board and its committees. The immunity extends to the former officials as well. The bill was rushed through the cabinet on the plea of timely fulfilling of an International Monetary Fund (IMF) conditionality. At present, the immunity is available to the armed forces only. Other institutions have been subjected to its no holds-barred approach. Businesspersons approached the army chief for relief. The bureaucracy’s foot-dragging is attributed to the fear of the NAB. The political class complains of targeted victimisation. With this etiology, it is not hard to understand the attempt to keep NAB at an arm’s length. Perhaps the State Bank is haunted by the NAB investigation of the merger of KASB Bank and BankIslami involving a former governor and some senior officials. But it is certainly hard to understand as an IMF conditionality. In its spring meeting of 2019, the World Bank-IMF Development Committee discussed institutional accountability. The context was provided by a landmark US Supreme Court judgment that international financial institutions (IFIs) are not immune from prosecution by domestic courts. How can then an IFI be a party in seeking immunity for an institution in a recipient country from the accountability law of the land? According to the 1997 staff guidance note, the IMF missions’ “engagement on issues of corruption depends on the implications for macroeconomic performance”. It is not an area of the core mandate of the IMF.
Reportedly, the draft was negotiated between the State Bank and the IMF team in March last year and forwarded to the finance ministry. The ministry raised many questions that led to its deferral in the following April by the Cabinet Committee on Legislative Cases (CCLC). It is understood that the provision related to immunity from the NAB Ordinance was not there at that time. The inclusion is recent and then the dissenting finance ministry now took the unusual step of bypassing the CCLC to present it directly to the cabinet for approval. Not a single eyebrow was raised in the cabinet and the approval was instant.
The story so far. The IMF is less likely to have imposed this exceptional condition. While the 1997 guidance note recognises that it is not always possible to keep the politics separate from the economic, especially in the state-capture settings, its staff is expected to try to follow the dichotomous approach. There is some likelihood that the State Bank included it in the draft due to the experience of the lingering investigations against former officials, and fears of a repeat in the future. Enters the finance ministry and the politics begin. It seizes upon the opportunity knowing that a former finance minister was also under investigation. No matter, the gentleman belonged to the main adversary party. The processor was made to work at a break-neck speed. This is where the plot thickens. Last Thursday, the Prime Minister constituted a 10-member committee to discuss amendments to the NAB law with the opposition.
For those of us debating the State Bank independence, the Nobel laureate Stiglitz says it makes the IMF “more accountable to people who are increasingly less accountable themselves”. As we know, the IMF is overseen by central bank governors and finance ministers. His warning: “macro issues are far from mere technical matters; they involve trade-offs requiring political judgments. Even if there are arguments for depoliticisation, this does not mean that decision-making should be unrepresentative.”
And for those looking askance at the governor’s secure tenure, take heed from the HEC chairman’s episode. The end is just an ordinance away.