Monday, March 4, 2013

State Aristocracy’s Pakistan – 21: Finance Minister’s cousin appointed to State Bank board of directors

ISLAMABAD: Prime Minister Raja Pervaiz Ashraf has appointed a first cousin of Finance Minister Saleem Mandviwalla to the Central Board of Directors of the State Bank of Pakistan (SBP) apparently in violation of the law.

Mehmood Mandviwalla is a practicing lawyer, a profession that disqualifies him from holding the position. He is also a partner at Mandviwalla and Zafar – advocates and legal consultants.

The State Bank of Pakistan Act 1956 states: “The Directors shall be eminent professionals from the fields of economics, finance, banking and accountancy, to be appointed by the federal government. Those appointed to the board shall have no conflict of interest with the business of the bank.”

The clause, which was inserted in the act in March last year, was aimed at depoliticising the board and ensuring that relevant people sit on the board, which is entrusted with vast powers in the SBP policymaking.

Mehmood was among the five directors who were appointed by Premier Ashraf on February 27 on the advice of the finance minister.

When contacted, Finance Minister Saleem Mandviwalla defended the move and insisted that the law provides that a lawyer can be appointed as director of the SBP.

When the relevant clause of the law was quoted, he said, “The SBP governor (Yaseen Anwar) wanted a lawyer on the board.” He added that the governor wanted someone with working knowledge of the SBP to be appointed as a director.

The SBP Act empowers the board to determine and enforce the limit of credit to be extended by the bank to the federal and provincial governments – powers that bring it head-to-head with the existing policies of the federal government.

According to the law, the SBP board provides general supervision and direction in monetary affairs for the smooth functioning of the economy. It formulates and monitors monetary and credit policy and determines the expansion of liquidity while taking into account the federal government’s targets for growth and inflation.

The Express Tribune also contacted the Prime Minister Secretariat and the SBP for their comments. Their spokespersons advised reporters to speak to the finance ministry that moved the summary for appointments.

Asad Umar, former president of Engro Corporation, who has also served on the SBP Board, said the law should be followed in letter and spirit. He said that since Mehmood was a close relative of the finance minister, the government should not have appointed him as a director. But Umar was of the view that Mehmood could help in banking supervision as he can add value to the board’s work.
Umar went on to say that after the new appointments, there was structural weakness in the board since there was no economist.

The other four newly appointed members are Iskandar Khan, former president of Pakistan Sugar Mills Association, Iqbal Hasan, a former banker, Nawaz Tiwana, former managing director of the Pakistan International Airlines and Shahid Ahmad Khan.

The question has also been raised over appointment of Iskandar Khan whose appointment is also in violation of law. While talking to The Express Tribune, Khan said he had done accountancy courses but did not hold a Master’s in Business Administration.

Khan’s appointment is seen as a move to protect interests of the sugar lobby. The sugar industry has exposure to the banking sector and the central bank also regulates loans extended to the industry.

[The Express Tribune, March 2, 2013]

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