Key fiscal policy board has not met since August 2019: report

ISLAMABAD: The Pakistan Tehreek-e-Insaf (PTI) led government has not convened a meeting of the Monetary and Fiscal Policies Coordination Board (MFPCB) since August 2019 despite taking important decisions that would otherwise require the ascent of the board.

According to a report published in The News on Thursday, the Monetary Policy Committee (MPC) of the government had kept the policy rate unchanged at 13.25 percent earlier this week after holding a heated and divided debate over the issue in the committee. 

The official minutes of the last MPC meeting held on Nov 22, 2019, stated, “The MPC decided to maintain the policy rate at status quo with a majority vote of 8 out of 10 members, with two votes for decreasing the policy rate by 25bps". 

Also read: Pakistan likely to miss growth target: SBP

On Tuesday, the MPC held a meeting after a two months gap to debate over changes to the policy rate. Sources said that opinion was divided over the matter, with some members openly opposed to maintaining the status quo with regards to the policy rate. 

One official told The News  on condition of anonymity that the decision to keep the rate unchanged passed the committee with a thin majority. "More than 2 members of MPC opposed status quo this time," the official reportedly said. 

"The state bank discloses the voting pattern of its monetary policy decision through the publishing of minutes which typically takes 4 to 5 weeks after the meeting," a spokesperson for the State Bank of Pakistan (SBP) said in response to questions about the matter. 

Also read: State Bank keeps policy rate unchanged at 13.25 percent

More importantly, the Monetary and Fiscal Policies Co-Ordination Board (MFPCB), that was part of State Bank of Pakistan (SBP) Act 1956 under Section 9-B, has been completely ignored as it is required to meet once on a quarterly basis, but a meeting has not been held since August 2019.

Top official sources confided to The News on Wednesday that the MFPCB was part of SBP Act as it was placed under chairmanship of finance minister and other members with a crystal clear mandate to coordinate fiscal, monetary and exchange rate and meet regularly. 

No meeting of of the MFPCB was held in last six months so how the fiscal and monetary coordination is being done, The News claimed. There are apprehensions of rising headline inflation that might cross 13 percent mark for January 2020. 

Also read: SBP's forex reserves on an upward trajectory

The sub-committee constituted by National Assembly Standing Committee on Finance under chairperson Ayesha Ghous Pasha has concluded in its finding that monetary expansion contributed 33 percent into rising inflationary pressures during the current fiscal year. 

Indirect taxation and higher energy tariff also contributed 12 and 12.8 percent respectively to the pressures, according to the standing committee. 

"There is need to understand that it is cost push inflation in our country and there is no need of further demand compression," Pasha said when contacted for comments. This wrong prescription, she said, might result in increased hoarding and shortages.

Originally published in The News