ISLAMABAD: The Supreme Court said the government and not the courts can examine and implement economic and fiscal policies.
A two-judge bench comprising Chief Justice Umar Ata Bandial and Justice Athar Minallah, on Monday, heard the petition of Dr Muhammad Zubair Khan regarding the increase in the interest rates of returns on short-term investment in blatant violation of the Fiscal Responsibility and Debt Limitation Act, 2005.
Dr Zubair, a PhD from John Hopkins University, who has 40 years of experience in macroeconomic and trade policy-making filed a petition in July 2020, requesting the apex court to declare the appointments of Dr Hafeez Sheikh, Advisor to the Prime Minister, Finance Division, Dr Reza Baqir, Governor State Bank of Pakistan (SBP), and Murtaza Syed, Deputy Governor SBP devoid of transparency and accountability.
The petitioner maintained that economic decision-making grossly jeopardises not only future economic development but also bears a direct nexus to the daily lives of the citizens of Pakistan.
The Registrar’s Office had then raised objections on the petition, which were removed by Justice Bandial in April 2021, but it was heard for the first time in the open court on Monday.
During the proceeding, the chief justice asked the petitioner’s counsel not to get the court involved in the economic and financial matters, adding that the country has already been facing a bad economic situation, and it is not the right time for the court to hear such issues.
The petitioner’s lawyer, Mian Abdul Rauf, informed the bench that in 2020, the then federal government had obtained an excessive loan; therefore, the petition was filed before the apex court but now Hafeez Sheikh and Reza Baqir are not in the country. He said by taking an excessive loan, the constitutional provisions were violated.
The chief justice remarked that the petitioner’s case is that Fiscal Responsibility and Debt Limitation Act, 2005 was not fully complied with. Justice Minallah asked the counsel that his client should have approached the High Court, adding the country is facing financial difficulties.
The chief justice asked the counsel that the issues raised in the petition are pertinent. However, he said it is not the right time that the courts hear such petitions. Justice Minallah asked the lawyer to give these suggestions to the federal government, and not to get the Court involved in the financial matters. He further said the federal government is an appropriate forum to manage the country’s economy.
Dr Zubair had also mentioned in his petition that in the fiscal year 2019-20, the federal government spent the largest amount ever on any budget item in the history of the country on interest payments as a result of a self-imposed decision to raise interest rates, which was avoidable, and which was not in the economic interests of the country, and which exposed the financial system and the foreign exchange market to high risks of severe instability by encouraging the inflow of “hot money” into the country. This avoidable waste of scarce public funds was also fuelled by continuous borrowing to finance excessive expenditures including on the mentioned interest payments at the cost of rising public debt leading to an unsustainable fiscal situation.
Specifically, the government spent Rs2,709 billion on interest payments which is nearly two-thirds (64.3 per cent) of all tax revenue receipts collected by the government in the Financial Year 2019-20, more than twice the defence budget in times of grave threats to the security of Pakistan, three and a half times the development budget at a time when gross domestic product (GDP) growth is at its lowest in recent years, and 11 times the expenditures on social protection.
The unjustified interest rate shut down industry, trade and commerce, transport and construction. Large-scale manufacturing was declined by four per cent (July-December Financial Year 2019-2020). Instead, it encouraged foreigners and a few Pakistanis to invest in interest-bearing instruments, contrary to the constitutional and Islamic injunctions to avoid and refrain from the business of usury and interest rates.
He said that the harmful policies which were not in the interest of Pakistan were adopted by an economic team which was not legally appointed and/ or acted beyond their authority, who did not act in the interest of Pakistan, ensnaring the country in a debt trap and then in an interest rate trap which threatened the stability of the foreign exchange market.
As a result, Pakistan has been placed at the mercy of foreign creditor countries; thus, gravely compromising the independence and sovereignty of the country.
Copyright Business Recorder, 2023