During a meeting of the Senate Standing Committee on Finance, the Ministry of Finance expressed its opposition to raising policy rates, citing that a 1% increase would result in an additional Rs600 billion in debt servicing.
The committee focused its discussion on the implications of higher interest rates on businesses, with the chairman and other senators arguing that the increased interest rates were failing to curb inflation.
Dr. Inayat Hussain, Deputy Governor of the State Bank of Pakistan (SBP), informed the panel that interest rates had been raised to combat rising inflation, and this measure had yielded significant results in recent months.
Senator Mandviwalla questioned the effectiveness of interest rates in controlling inflation and requested a comprehensive report from the SBP on this matter.
Banks were heavily criticized during the meeting for refusing to open accounts for parliamentarians under the pretext of being politically exposed persons (PEPs).
The committee was briefed on the challenges faced by PEPs in accessing financial services. The SBP deputy governor mentioned that a system had been established where a focal person was assigned to every branch to address such issues. However, the system had failed to produce satisfactory results for unknown reasons.
The committee recommended that all banks be directed to appoint dedicated officers for PEPs in all commercial banks, as previously instructed by the committee.
The Senate panel also called for a report from the Federal Board of Revenue (FBR) and the State Bank of Pakistan (SBP) regarding alleged Trade-Based Money Laundering (TBML) amounting to over Rs69 billion through the over-invoicing of imported solar panels, resulting in Rs25 billion being deposited in banks as cash transactions.
Chairman Senator Saleem Mandviwalla suggested handing over the investigation to the Federal Investigation Agency (FIA), but the FBR opposed this proposition. The FBR stated that it would provide a detailed report, identifying those allegedly involved in money laundering when the country was under the scrutiny of the Financial Action Task Force (FATF).
Throughout the hearing, the SBP and FBR attempted to shift responsibility onto each other, highlighting that no red flags were raised during the alleged money laundering activities.
Member Customs informed the senators that seven companies involved in money laundering had been identified, and six first information reports (FIRs) had been filed against them. Senator Mandviwalla expressed concern that solar panel importers had successfully laundered Rs69 billion over five years without detection, with Rs25 billion deposited in two different accounts without scrutiny. He directed the tax collection authority to conduct an inquiry and submit a report to the committee.
