Finance Minister rules out financial emergency, a freeze of foreign currency accounts

By Muhammad JuniadPublished On 06 Jan 2023

Federal Finance Minister Miftah Ismail has ruled out the possibility of a financial emergency being declared in the country or a freeze of foreign currency accounts or taking over private bank lockers, as rumors spread on social media.

The State Bank of Pakistan (SBP) has also issued a release to ‘refute’ the rumors, which the finance minister said were “coming from biased quarters.”

On Monday, the finance minister took to Twitter to alleviate the fears of investors and the general public.

Miftah Ismail did say that Prime Minister Shehbaz Sharif would likely announce austerity measures “to save government expenditures” but added that “there is not going to be any declaration of financial emergency. Nor is there any financial emergency.”

Miftah Ismail said that “after two increases in petrol prices, we are out of the financial crisis.”

The finance minister categorically said that the government has no plans “to freeze foreign currency accounts or Roshan Digital Accounts or take over people’s private lockers.”

“We have never even contemplated these steps. Nor will we ever do it. Speculation on social media about this is wrong and coming from biased quarters,” he said.

The government’s decision to increase fuel prices by Rs30 twice in less than a week has led to a backlash from the common man, who fears it will not only increase their daily commute expenditure but will also lead to a hike in food prices.

Many social media users have demanded the government to cut the petrol allowance for government officials, bureaucrats, and others.

Central bank offers reassurance

The central bank issued a clarification saying “the Government of Pakistan and the State Bank of Pakistan assure all account holders maintaining Foreign Currency Accounts (FCA), Roshan Digital Accounts (RDA) and Safety Deposit Lockers in banks in Pakistan that their accounts and lockers are completely safe, and that there is no proposal under consideration to put any restriction on them.”

“Rumours are circulating on social media that the Government or State Bank is considering freezing or placing restrictions on withdrawals from Foreign Currency Accounts, Roshan Digital Accounts and Safety Deposit Lockers. Such rumours are absolutely incorrect and baseless. It is clarified that such a proposal has neither been considered presently nor in the past. Moreover, foreign currency accounts including Roshan Digital Accounts are legally protected under the Foreign Currency Accounts (Protection) Ordinance 2001, and the Government and the State Bank are committed to protecting all the financial assets in Pakistan including the ones mentioned above.

“The Government and State Bank are taking all necessary measures to ensure macroeconomic stability in the country. The recent difficult decisions taken by the Government, including the reduction of subsidy on petroleum products, will pave the way to reach an agreement with the IMF and release of the IMF tranche and financial assistance from other multilateral agencies and friendly countries. We are confident that these measures will relieve the temporary stress being faced due to elevated global commodity prices and geo political tensions, and eliminate uncertainty in the economy.”

What measures govt may announce

While the federal government may not resort to the drastic step of imposing a financial emergency, the austerity measures it plans may include:

• Ordering markets and malls to operate only in daytime or limiting timings in commercial areas

• Rationing petroleum and other quotas to low energy imports

• Ordering private offices to switch to work from home for some days in a week as they did during the coronavirus pandemic.

What is financial emergency in Pakistan

A financial emergency is a constitutional measure signed by the president and starkly different from austerity steps, which are usually announced by the prime minister and chief ministers.

Article 235 of the Constitution of Pakistan provides for a financial emergency. The president declares a financial emergency after consulting with provincial governors or the governor of a particular province where the emergency is being declared.

Following the declaration of financial emergency, the federal government issues directions to provinces to implement certain financial measures, which may also include a cut in the salaries of government officials.

Foreign currency accounts are also frozen in the event of a financial emergency.

This is the reason that the measure is dreaded by most.

Article 235 has been reproduced below.

235 Proclamation in case of financial emergency.

(1)  If the President is satisfied that a situation has arisen whereby the economic life, financial stability or credit of Pakistan, or any part thereof, is threatened, he may, after consultation with the Governors of the Provinces or, as the case may be, the Governor of the Province concerned, by Proclamation make a declaration to that effect, and while such a Proclamation is in force, the executive authority of the Federation shall extend to the giving of directions to any Province to observe such principles of financial propriety as may be specified in the directions, and to the giving of such other directions as the President may deem necessary in the interest of the economic life, financial stability or credit of Pakistan or any part thereof.

(2)  Notwithstanding anything in the Constitution, any such directions may include a provision requiring a reduction of the salary and allowances of all or any class of persons serving in connection with the affairs of the Province.

(3)  While a Proclamation issued under this Article is in force the President may issue directions for the reduction of the salaries and allowances of all or any class of persons serving in connection with the affairs of the Federation.

(4)  The provisions of clauses (3) and (4) of Article 234 shall apply to a Proclamation issued under this Article as they apply to a Proclamation issued under that Article.