(042) 35300721
Mon - Fri 09:00-17:00
Free consultant

Institutional Challenges

Huzaima Bukhari, Dr. Ikramul Haq & Abdul Rauf Shakoori

The majestic architecture of a state stands with the support of three main pillars, namely, Legislature, Executive, and Judiciary. The success and strength of a state consolidate when all these work in harmony and provide strength to each other. The institutions that stem out of the executive branch are the key organs of the state. These are vested with the responsibility to run the state’s affairs in a way that produces value for its citizens. In order to achieve this governance model, it is paramount to regulate the institutions so that these are equipped with adequate financial and human resources along with autonomy in executing their tasks.

Legislative branch of the state works as a power-emanating source for these institutions through laws and regulations to entrust them with responsibility and powers. These legal instruments enable them to establish their overall objectives and assign powers for enforcement. Modern governance models educate us about the importance of having a balance among resource allocation, responsibility, powers, and accountability. However, in Third World countries like Pakistan, the cohesion among these elements is missing. It is unfortunate that institutions fail to perform their functions with impartiality and within stipulated parameters, rather, they work as aiders/abettors to the rich and powerful. The common man has lost faith in this system and strongly believes that the commitments made to him by the state have breathed their last surrendering to these “untouchables”. Undue influence, compromise on merit and subjective application of laws, have tarnished the image and output of the executive branch.

Judiciary being the flag bearer of law and justice is the custodian of the rights of people and the only line of defence for a citizen against injustice and wrongdoings. However, during the last seven decades, judiciary has been hand in gloves with those who are powerful. Rather than approaching the judiciary for their rights, people prefer to settle their dispute themselves as they know that proceedings continue for decades without any outcome. Courts have been deciding matters subjectively rather than on principles of law. Selective application of law and varied interpretation is the new norm.

The questionable role of judges has ruined Pakistan’s democratic culture, which reflects badly on our economy as well. Above all, the accountability process of judges remains with fellow judges at the Supreme Judicial Council which is headed by the Chief Justice of Pakistan followed by the senior Supreme Court Judges and Chief Justices of High Courts. The contempt laws hinder talk about judges’ conduct and who cannot even be questioned about their substandard judgments resulting in billions of dollars penalties at international forums/tribunals. Despite enjoying absolute powers, Judiciary’s output is below par in Pakistan and it has failed to improve its image. As per the recent World Justice Project Report, Pakistan’s Judiciary is ranked at 130 out of 139 countries in the world.

Another example is that of National Accountability Bureau (NAB), which was established in 2001 to work against corruption. However, since its inception, it has played a compromised role. Most of the cases framed by the NAB are politically motivated to facilitate incumbent governments.  Majority of its officials lack professional qualifications to investigate white-collar crimes. Political appointments on key positions of those having questionable educational backgrounds have not only tarnished the image of the institution but have adversely affected the state. 

The classic example of its incompetence can be seen in the Broadsheet Case. The most disturbing fact is that Pakistan’s top anti-graft agency signed an Assets Recovery Agreement (ARA) with a shell company in the hope of recovering assets in the Unites States, Europe and Asia. Interestingly, both the contracting parties lacked white-collar crimes expertise. The drop scene of this arrangement landed us into paying billions of rupees to a so-called fake firm but nobody has been made responsible for this fraud. Although a commission was constituted by the Prime Minister of Pakistan to investigate the matters, the person appointed to lead the commission has been a controversial judge and, in the past, he was on the payroll of NAB. Judiciary and NAB are known as independent bodies—judiciary is responsible for providing justice to Pakistan’s citizens and NAB is given the mandate to end corruption—both institutions enjoy absolute immunity and no one can question about loss of billions of dollars along with reputational damage inflicted on Pakistan’s economy due to their arbitrary decisions.

On the economic front, Pakistan’s government believes that all its failures are due to the current structure of the State Bank of Pakistan (SBP). SBP’s role as an autonomous institution would help them lower the inflation rate, which will ultimately lead to financial stability. Therefore, the government of Pakistan tabled the State Bank of Pakistan Amendment Bill 2021 intending to further amend the Act of 1956:

  • to make it an autonomous body;
  • to achieve the objectives of domestic price stability, financial stability; and
  •  support for the government’s economic policies to foster.

Apart from above, the proposed Bill provides absolute immunity to board members, Deputy Governor, member of any board committee, and monetary policy, officers, and employees of the bank. The Bill further provides them immunity from being personally liable for any decision made in good faith and in case of proceedings initiated they would be compensated by the bank accordingly. Despite these privileges, what if SBP fails to achieve the assigned objectives? Since 2018, SBP is operating almost independently and pursuing policies that are not aligned with public interests.

Similarly, the Ministry of Finance has failed to achieve its basic goal of providing better living standards by generating economic activity in the country. Moreover, neither higher taxes could be collected nor did the government promote an efficient tax collection system. The government lacks any strategy to counter rising unemployment. Rather, both Ministry of Finance and SBP are operating under International Monetary Fund’s (IMF) directions. They have failed to generate enough revenues forcing Pakistan to tow lenders’ policies.

In the existing circumstances, SBP might be given autonomy but ultimately it will remain subservient to IMF. Mr. David Lipton, First Deputy Managing Director and Acting Chair already demanded this in the Press release of IMF 19/264 in July-2019 stating: “A flexible market-determined exchange rate and an adequately tight monetary policy will be key to correcting imbalances, rebuilding reserves, and keeping inflation low. In this regard, measures to strengthen the State Bank of Pakistan’s (SBP) autonomy and eliminate central bank financing of the budget deficit will enable the SBP to deliver on its mandate of price and financial stability”.

Similarly, SBP Governor updated IMF through his letter of intent in March 2021 confirming submission of the amendments to the Parliament. It is interesting to note that this idea of “autonomy” did not come from the Legislature but rather as commitment to IMF.  The impact of these foreign-directed policies might get us a few dollars as short-term relief but in reality, these actions will compromise our national security. Our weak economic policies have brought us to a position where lenders’ focus is on discussing sensitive bank accounts maintained by military and intelligence agencies. This is alarming as security institutions operate in their own way. Being responsible for maintaining national security, use of their funds is strictly confidential and monitoring their security-related accounts might pose a direct threat to national security.

The importance of autonomy and independence cannot be denied and our legislative functionaries have transmitted such powers to all key institutions. However, it is of paramount importance that we assign and appoint the right people for the right job, who are competent enough to handle complex situations, work with a futuristic vision and uphold impartiality, and do not end up being enslaved by the powerful elite. 


Huzaima Bukhari & Dr. Ikramul Haq, lawyers and partners of Huzaima, Ikram & Ijaz, are Adjunct Faculty at Lahore University of Management Sciences (LUMS), members Advisory Board and Visiting Senior Fellows of Pakistan Institute of Development Economics (PIDE). Abdul Rauf Shakoori is a corporate lawyer based in the USA and an expert in ‘White Collar Crimes and Sanctions Compliance’. They have recently coauthored a book, Pakistan Tackling FATF: Challenges and Solutions.   

Related Posts

Leave a Reply