A response to Dr Nadeem Ul Haque’s “Who built the field?” and “The saver pays”
Dr Nadeem Ul Haque has returned to these pages with two parts and, as ever, with arguments worth engaging. This response came quickly, and the quick turnaround is itself a small story about how such work has changed: the arguments were already formed in my head — formed by years of practice and reading — and AI did in an evening the legwork a team of researchers would once have taken a fortnight over. My dependence on borrowed hands for evidence is eroding; what remains scarce is the prompting — knowing which questions to ask — and the checking of every answer before it reaches print.
First, the concessions, because they are quietly large against his initial op-ed. The word cartel has been retired: a protected oligopoly, he now argues, needs no secret meetings. Raast works. Bank balance sheets are sound. The taxes are heavy and the compliance rules were not written in Karachi.
What remains is a single new claim on which both his latest writer-ups rest: that bankers built the field — that they have run the finance ministry, sat on the central bank’s board and staffed the regulators for about twenty-five years.
That is an empirical claim, and it can be tested against three things the columns never seem to consult: the statute, the register, and his own data.
The statute
Start with the room he says bankers sit in. Under Section 13(f) of the State Bank of Pakistan Act, as amended in 2022, any person who is a director, officer or employee of a bank — or of any entity the State Bank regulates — is disqualified from serving as Governor, Deputy Governor, non-executive director of the Board, or external member of the Monetary Policy Committee. Section 13(g) goes further: even a shareholder of a bank is disqualified.
A serving banker, or a sponsor of a bank, cannot sit on the State Bank’s Board or its Monetary Policy Committee; the law forbids it, and the reason the law gives is precisely the one Dr Haque worries about — conflict of interest.
The one room his argument names is locked, by statute. If the residual claim is that former bankers appear in public roles, so do former economists, and former judges, generals and bureaucrats; a résumé is not a conspiracy. And his cooling-off remedy already exists: Section 16A of the same Act bars those very office-holders from employment with any institution the State Bank regulates for two years after they leave, and the record suggests the discipline has not been compromised. If it needs further strengthening, I co-sign wholeheartedly.
The register
Next, the helm itself. Since August 1947, thirty-one individuals have held Pakistan’s finance portfolio as ministers, caretakers or portfolio-holding advisers. Exactly three were commercial bankers, and their combined tenure is thirteen of seventy-nine years: about one year in six. Of the rest, six were economists, holding roughly twelve years between them — about one in seven — and the remaining twenty-two, of every other background, held some fifty-four years: nearly seven in ten. One comparison deserves a word: economists, the discipline from which the charge is pressed, held the portfolio barely less long than the bankers did.
The State Bank’s register reads the same way: six of its governors since 1948 were commercial bankers, holding the chair for roughly twelve of seventy-eight years. Add the two chairs together and you do arrive at his twenty-five years — out of more than a hundred and fifty years of chair-time between the two institutions: one year in six, which is the difference between presence and capture.
The count also leaves the third chair aside — the Planning Commission, the economists’ own citadel and for decades the engine of economic policymaking, until the crown passed to the IMF for want of research and thought leadership. And grant, for argument’s sake, the narrowest frame — the last twenty-five years or so, the one window Dr Haque arbitrarily chose to support his argument, and the one in which every banker tenure falls.
Even there, bankers were at the wheel roughly half the time — and the one sustained climb in the whole credit series sits inside a banker tenure, while the long slide belongs to no profession, because it belongs to the deficit.
His own series
If bankers had designed a field hostile to private credit, their years in charge should show it. The data show the opposite. On the World Bank’s series, private credit climbed through the eight banker years to its modern peak near twenty-four percent of GDP in 2008, then slid, through fifteen years steered by everyone else, to barely eleven today. The series does not track the minister’s profession; it tracks the deficit.
Credit deepened while the fiscal gap was containable and collapsed as the sovereign’s borrowing swallowed the system — which has been my argument since Same Banks, Different Field.
The ledger
Since Dr Haque has made biography the argument, read it — without the names, since the argument is about the chairs, not the men. The first banker tenure, from 1999 to 2007, completed the very privatization Dr Haque says he championed, alongside the Paris Club restructuring, the CIRC bad-loan clean-up and the fiscal-responsibility law of 2005; private credit peaked on its watch.
The second, in 2008–10 and again in 2021–22, steered the 2008 stabilisation and presided over the Seventh NFC Award — the largest fiscal devolution since 1973 — then ended its first innings with a resignation over the broad-based sales tax that could not be passed: men captured by an industry do not resign for failing to broaden the tax net; the second innings delivered record collection.
The third, since 2024, has taken the tax-to-GDP ratio up by more than a point, secured agricultural income tax in all four provinces in 2025 — a seventy-eight-year first, and the precise base-broadening reform his latest op-ed declares the banker network poorly placed to push — moved new federal pensions to defined contribution, rationalised the tariff wall, and collected upgrades from all three rating agencies.
Attribution is always arguable; ministers ride governments, programmes and cycles. But if lineage is the test, the test flatters the bankers — while at the State Bank the most admired governorships belonged to economists; competence has no caste. Which leaves the real question his articles never ask: why have bankers appeared in these rooms at all, and only recently? Not because a network supplied them, but because a sovereign in difficulty kept demanding them: when delivery fell short elsewhere, the shortlist shrank to those who had delivered, and the same names were called back again and again. That is a verdict rendered by others, not a seat seized.
The ADR episode, re-examined
The centre piece of his first column is the 2024 advances-to-deposit levy — proof, Dr Haque says, that banks can lend when pressed. Look at what the pressure actually produced.
The Finance Act of 2022 had set tax on banks’ income from government paper up to sixteen percentage points higher wherever the year-end advances-to-deposit ratio fell below its thresholds. To cross the threshold by 31 December, banks lent where credit can move in weeks: over a trillion rupees to finance companies in four months (the Rs1.46 trillion stock is his own figure) and to blue-chip treasuries on short bullet loans priced at, and in documented cases nearly twelve points below, KIBOR.
The mirror image completes the picture: to shrink the denominator, several of the largest banks notified monthly fees on their biggest deposits, withdrawn within a fortnight under the regulator’s displeasure — the one recent episode in which savers were charged to go away was manufactured by the very levy he celebrates.
The display then unwound: the ratio, 38 percent in August, touched 52 at 31 December, was back to 43 by March and 38 by June — over Rs1.4 trillion of the lending retired within ten weeks of the year-end — and the State Bank’s half-year review recorded the lowest ratio since 2014.
Now the test he never applies: yield. For one tax year the rule was erased retrospectively; for another, demands of nearly two hundred billion rupees sat stayed in the High Court; for the decisive year-end, banks simply crossed the threshold — and in the last days of December 2024 the levy was abolished unassessed, replaced by a flat forty-four percent on banks’ entire income, stepping to forty-two.
A tax on a ratio changed the ratio and collected next to nothing; a tax on profit changed nothing and collected everything: banks paid over a trillion rupees in tax last fiscal year, close to a tenth of all federal collection, at the 54.5 percent burden he himself cites.
And the episode’s lesson belongs to my side of this debate, not his: ordered to lend in ninety days, banks could find only already-documented borrowers. Deadlines do not create balance sheets; data does, and the ecosystem does. Alvin Roth won his Nobel for market design, and his book Who Gets What — and why: The New Economics of Matchmaking and Market Design is at heart a catalogue of what happens when a market’s rules are badly written: participants do not obey the design, they trade around it. The 2024 year-end belongs in that catalogue. The durable series, meanwhile, needed no levy. SME credit has roughly doubled to a trillion rupees; farm borrowers have risen from 2.7 to 3.3 million; and housing — barely Rs225 billion accumulated over the preceding eight years — added Rs103 billion, a third of the book, in a single quarter this year, on 71,690 approvals under the new housing scheme, because the ecosystem came first: a targeted subsidy, workable foreclosure, thirty-one institutions at the counter.
All of it grew without a deadline and all of it outlived the levy — which is how one tells credit from choreography — and all of it with a banker at the finance ministry.
The saver, re-examined
His second op-ed charges that the saver pays. Begin with who wrote the saver’s floor. The minimum rate on savings deposits exists because the regulator imposed it in 2008 and has maintained it for eighteen years — a price floor enforced against an industry is the opposite of capture by it.
What changed in 2025 and 2026 is scope, not principle: from January 2025 the floor was lifted for financial institutions, public enterprises and listed companies, and from August 2026 it applies to individual savers with balances up to ten million rupees — money that negotiates its own price was released; the ordinary saver’s floor stands.
Islamic deposits never carried the floor, by design, because profit-and-loss sharing is priced through the State Bank’s pool rules instead — and since January 2025 Islamic savers have had a floor of their own: no less than three-quarters of the pool’s gross yield. The year savers truly bled — 2023, with inflation near thirty-eight percent against a policy rate of twenty-one — was the inflation tax, levied by the sovereign’s deficit on every rupee instrument in the country: deposits, savings certificates and currency alike.
Bank margins did not widen by seventeen points that year; the gap was collected by the only borrower who issues the unit it repays — the state. And look where Dr Haque says savers fled: cash, plots, gold, dollars — none of which pays a return. One does not flee a low rate into assets that pay nothing; one flees documentation.
Twelve trillion rupees in circulation is the tax base hiding. As for InvestPak: applause, not an asterisk — direct retail access to the sovereign’s paper is what both sides of this debate demanded.
The protection, itemised
His closing charge rests on a bargain: the state gets cheap funding, and “banks get protection.” Itemise the protection. Licensing and capital floors protect depositors, not banks — deposit-taking is restricted in every jurisdiction on earth because it is other people’s money. Resolution by merger protected depositors: KASB was sold entire for one thousand rupees; Silkbank’s shareholders were exchanged into dust against negative equity.
The deposit-protection fund is financed by premiums the banks themselves pay; the rate floor on savings ran against the industry for eighteen years; and central-bank liquidity is priced and collateralised, exactly as it is in London.
The one protection bank owners have actually received elsewhere — rescue with taxpayer money, from RBS in Britain to the uninsured depositors of Silicon Valley Bank in America — has never once been extended in Pakistan’s privatised era.
A protected industry does not pay the economy’s highest tax rate, lose four global members by choice, and watch its failed owners zeroed. Every item on the list, inspected, protects someone from the banks — not the banks from anyone.
(My Part II of this moot — “Wrong Door, Right Agenda”: the alternatives, the agenda worth agreeing on, and the door we should all be knocking on — so the debate does not stray from the main issue, and closes where I suspect Dr Haque and I already agree: on the right agenda.)
(The writer is a development focused and impact oriented banker. The second and last part will be carried in tomorrow’s issue)
Copyright Business Recorder, 2026
The writer is President and CEO of The Bank of Punjab
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