Finance ministry opposes policy rate hike
- Senators say increased interest rate failed to control inflation.
- Seek report on how inflation is controlled via interest rate.
- Discuss higher policy rate and its negative impacts on businesses.
ISLAMABAD: The Ministry of Finance on Wednesday opposed increasing policy rates in the Senate Standing Committee on Finance meeting, arguing that a 1% hike increases debt servicing by Rs600 billion.
The panel, according to a The News report, dwelt upon higher interest rates and their negative impacts on businesses. The chairman and other senators argued that the increased interest rate was failing to control inflation.
SBP Deputy Governor Dr Inayat Hussain informed the panel that the interest rate has been increased to control the rising inflation and it has borne significant results in the past few months.
However, Senator Mandviwalla asked how the interest rate could be an effective tool in controlling inflation and directed the SBP to provide a comprehensive report in this regard.
The banks also faced severe criticism in the meeting for refusing to open up accounts for parliamentarians on the excuse of politically exposed persons (PEPs).
The committee was briefed on difficulties faced by PEPs in availing financial services. The SBP deputy governor stated the system is in place wherein a focal person has been deputed in every branch to sort out such issues; however, the system has failed to provide desirable results due to unknown reasons.
The committee recommended that all banks be directed to make the dedicated officers for PEPs functional in all commercial banks, designated on the direction of this committee earlier.
Senate seeks report on money laundering
The Senate panel also sought a report from the Federal Board of Revenue (FBR) and State Bank of Pakistan (SBP) on alleged Trade-Based Money Laundering (TBML) of over Rs69 billion through over-invoicing of imported solar panels, whereby Rs25 billion were deposited in banks as cash transactions.
Chairman Senator Saleem Mandviwalla indicated handing over the probe to the Federal Investigation Agency (FIA) but the FBR opposed the proposition.
The tax collecting authority said that it would share its detailed report by fixing responsibility on those who were allegedly involved in money laundering when the country was under the Financial Action Task Force’s (FATF) radar.
Throughout the hearing, the SBP and FBR tried shifting responsibilities on each other but it was highlighted that no one raised a red flag when the alleged scam was happening.
While deliberating on massive money laundering by solar panel importers, Member Customs informed the senators that 7 companies involved in money laundering were identified and six first information reports (FIR) have been registered against them.
Senator Mandviwalla observed that solar panel importers successfully laundered Rs69 billion in the last five years with FBR not raising an eye on any suspicious activity and, above all, Rs25 billion were deposited in two different accounts without any questions. He directed the tax collecting authority to carry out an inquiry and submit a report before the committee.