THE government appears to have inched closer to a muchneeded agreement for the revival of the IMF`s $6bn loan.

The two sides have reportedly struck a deal on a bill that will free the State Bank from the political influences of the fiscal authorities in addition to giving its governor unprecedented powers. Although both Islamabad and the IMF are keeping quiet on the outcome of the ongoing talks, the differences over the scope of independence for the State Bank was reported to be one of the several obstacles blocking the programme`s resumption that would have inspired international investors` confidence in our currently reeling economy. Islamabad has agreed to push the bill to amend the SBP Act of 1956, while the IMF is apparently ready to give it the time it needs for parliament`s approval of the proposed changes in the law. The bill, however, is expected to face strong resistance from the opposition.

There are no two opinions that a central bank should be autonomous and its core mandate should be to target inflation through independent determination of the monetary policy and market-driven exchange rate as suggested in the proposed bill.

That would free the central bankers of the `responsibility` of supporting the growth objectives of governments at the expense of price stability and financial soundness. One also tends to agree with the discontinuation by the bank of quasi fiscal operations or monetary actions taken on behalf of the government. We have seen fiscal authorities previously putting pressure on the central bank to force manipulation of the interest and exchange rates to support the rulers` political agenda. Yet the proposed amendments are not without problems. Most worrisome is the over-concentration of powers in the office of the bank governor and the central bank being put beyond the effective oversight of parliament. Indeed, the governor and other central bankers are being insulated through the bill from the controversial accountability laws. But that is no reason to put them beyond parliamentary oversight of their acts of omission and commission.

Nor is the annual submission of performance reports an alternative to the parliamentary accountability of the bank.

Both the government and IMF must rethink this part of the bill and ensure that the bank and its governor are answerable to the elected representatives else the bank would function more like a `state within a state`; and we already have too many bodies that fit the description.