Senate Committee
ISLAMABAD: The Senate’s Standing Committee on Economic Affairs, during a meeting on Monday, criticized the State Bank of Pakistan (SBP) for its lenient approach in penalizing commercial banks involved in a Rs65 billion heist.
These banks had imposed unauthorized higher charges for opening letters of credit (LCs) for imports during the foreign exchange crisis of 2022.
The committee, led by Senator Saifullah Abro, demanded comprehensive details regarding profits earned by these banks through foreign exchange dealings related to imports. The committee also urged the Economic Affairs Division to establish a special desk for monitoring foreign-funded projects.
Senator Abro raised concerns about the profits banks made by heavily charging for foreign exchange linked to LCs. The committee questioned the SBP’s actions and demanded the return of the Rs65 billion overcharged by various banks due to over-invoicing during 2022.
The senator pointed out that then-finance minister Ishaq Dar had acknowledged these excessive profits and had called for an investigation.
SBP officials responded by explaining that the central bank had investigated the issue and imposed fines amounting to Rs1.4 billion on banks found guilty of over-invoicing.
However, Senator Abro, dissatisfied with the response, demanded a more detailed report. He asked the SBP to provide a tabulated report of LC issuances from April to September 2022, including bank names, amounts, dollar exchange rates, and any actions taken by the central bank.
Senator Kamran Murtaza criticized the SBP for imposing what he described as an inadequate penalty of Rs1.4 billion, especially considering the substantial Rs65 billion in profits made by the banks. He labeled the fines insufficient and pushed for more stringent action against the responsible banks.
The committee’s dissatisfaction was further exacerbated by the SBP’s stance on the matter. Senator Abro expressed frustration that despite Ishaq Dar’s confirmation of the banks’ excessive earnings, the central bank appeared to downplay the issue.
He warned that the committee would not let the matter rest easily and directed the SBP to submit a full report within two weeks.
The SBP officials also mentioned that the Federal Board of Revenue (FBR) had imposed a 10% tax on foreign exchange income the previous year, but the banks had contested the tax in court, where the matter is still under litigation.
Despite this, Senator Abro highlighted that the central bank needed to take responsibility for the alleged Rs65 billion loss and asked for a detailed follow-up.
Separately, the committee discussed ongoing water sector projects worth $2.84 billion, funded by multilateral development partners. Total disbursements for these projects have reached $705.62 million so far. Bilateral development partners had also committed $730.94 million, with $480.61 million already disbursed.
The Water and Power Development Authority (Wapda) briefed the committee on the progress of the Tarbela Dam’s Fifth Extension Hydropower (T5HP) project. Initiated in 2017, the project aims to release water for irrigation through a tunnel, which has been operational for 90 days.
However, the tunnel’s functionality depends on adequate water levels in the dam. Wapda representatives noted that the provinces had initially objected to closing the tunnel for four years but eventually agreed.
The project is expected to cost $860 million, with $690 million coming from the Asian Development Bank and the Asian Infrastructure Investment Bank. Completion is anticipated in three phases by 2026.
The committee decided to continue discussions on the T5HP project in its next meeting and requested that the Wapda chief be present.
Additionally, the committee called on the Economic Affairs Division to establish a dedicated desk, headed by a technical expert, to oversee and monitor projects financed by multilateral and bilateral development partners as well as the United Nations agencies.
