IMF Demands Pakistan Cut Finance Secretary from Central Bank

The International Monetary Fund (IMF) has intensified its push for reforms to enhance the autonomy of the State Bank of Pakistan (SBP), urging Pakistan to remove the finance secretary from the central bank’s board and amend laws to curb federal government influence over commercial bank inspections. According to a report by The Express Tribune, these recommendations, outlined in the IMF’s Governance and Corruption Diagnosis Mission, aim to eliminate government oversight despite the state’s full ownership of the SBP. This marks the second attempt in three years to exclude the finance secretary, following a 2022 IMF-driven amendment that stripped the secretary’s voting rights on the board.

The IMF has also called for the immediate filling of two vacant deputy governor positions at the SBP to strengthen collective decision-making. Currently, only one of three sanctioned deputy governor posts is filled, with Saleem Ullah overseeing finance, inclusion, and innovation. Critical areas like banking, exchange rate, and monetary policy lack permanent leadership, with former deputy governor Inayat Husain serving in an acting capacity since November 2024. His dual nationality has delayed his reappointment, prompting the government to consider amending the SBP Act to allow dual nationals to serve. Nadeem Lodhi’s name has been finalized for one vacancy, pending cabinet approval, despite legal requirements to fill such posts within 30 days.

Additionally, the IMF proposes amending the Banking Companies Ordinance of 1962 to revoke the government’s authority to order SBP inspections of commercial banks, further insulating the central bank. The lender also recommends public disclosure of reasons for removing key SBP officials, including governors and monetary policy committee members, to enhance transparency. Finance Minister Muhammad Aurangzeb emphasized that the government has no role in setting interest rates or exchange rates, which are under the SBP’s mandate, with the rupee recently appreciating to Rs 282 per dollar.

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These demands come as Pakistan navigates a $7 billion, 37-month IMF loan program, with a review mission expected in September 2025 to discuss the next $1 billion tranche. The government has yet to accept the IMF’s recommendation to remove the finance secretary, and discussions remain ongoing. The SBP board, comprising the governor and eight non-executive directors, oversees operations, while the monetary policy committee handles key decisions like interest and exchange rates. As Pakistan balances IMF conditions with domestic priorities, these reforms could reshape its financial governance landscape.

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