ISLAMABAD: Chief Justice of Pakistan (CJP) Umar Ata Bandial on Monday observed that it was not an opportune time, especially when the country was facing the worst kind of economic hardships, to hear cases seeking directions for the government to scale down interest payments out of public money to finance the fiscal deficit.
Headed by the CJP, a two-judge bench had taken up a pro bono petition by former commerce minister Dr Mohammad Zubair Khan, seeking directions for the federal government to reduce the central bank’s policy rate by half to scale down interest payments being paid out of public money for financing fiscal deficit.
The bench postponed further hearing for an indefinite period, with a direction to the counsel representing the petitioner to seek fresh instructions from the petitioner about the fate of the case.
The observation came when Justice Athar Minallah, a member of the bench, suggested that the court should not be involved in cases on maintaining economic discipline when it was already entangled with a host of other things. It would be wise if the petitioner advances his proposals to the government to improve the economic situation, Justice Minallah observed, adding that the federal government and not the Supreme Court was the right forum to determine the economic policies and monetary discipline.
SC puts off proceedings in matter seeking drop in SBP’s policy rate
During the hearing, the counsel Mian Abdur Rauf argued that the government had committed a constitutional deviation by taking huge loans from the central bank in 2020, adding that former finance minister Hafeez Sheikh and former SBP governor Raza Baqir were already out of the country.
Earlier in March 2020, the CJP during a chamber hearing of an appeal against plea’s return, had accepted for regular hearing with an observation that “the petition reflects serious thought and presents an analysis that invites judicial consideration of legal matters relating to financial disciple and responsibility of the State.”
The order said the issue raised widespread implications for the national economy and the public at large for which the state also has legal obligations under the Constitution since the petitioner had asked for the relief of enforcing the mandate of the Fiscal Responsibility and Debt Limitation Act 2005 in letter and spirit as well as the requirements of the State Bank Act 1956, the Rules and Regulations as well as the Banking Companies Ordinance 1962, for safeguarding the national economy from the adverse effect of high interest rates given on deposits in Pakistan.
Dr Zubair Khan pleaded before the court that the reduction in deficit will have a number of positive effects and will contribute to the reduction of the external current account deficit and contain the depletion of foreign exchange reserves besides lower deficit will reduce inflationary pressures, and control the accumulation of debt.
The petition pleaded the fiscal space created by lower interest payments could be used to eliminate customs duties on machinery, raw materials and inputs to boost economy, increase exports and create employment and raise incomes.
The petition sought a direction for the SBP to immediately introduce appropriate capital controls and ensure orderly withdrawal of hot money from Pakistan and avoid the risk of instability in the foreign exchange market.
The arbitrary unlawful and unjustifiable increase in the interest rates, the petition highlighted, has increased the federal fiscal deficit in comparison of its GDP in blatant violation of the fiscal responsibility and Debt Limitation Act, 2005.
Specifically, the petition argued, the government will spend Rs3.2 trillion on interest payments, which was more than half of all the tax revenues by government.
Published in Dawn, August 22nd, 2023
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