This week, a two-judge bench of the Supreme Court led by Chief Justice Umar Ata Bandial and Justice Athar Minallah heard a petition from Dr. Muhammad Zubair Khan regarding an increase in interest rates on short-term investments. Dr. Zubair, who has 40 years of experience in macroeconomic and trade policy-making and a Ph.D. from John Hopkins University, filed the petition in July 2020.
He requested that the appointments of Dr. Hafeez Sheikh, Advisor to the Prime Minister, Finance Division, Dr. Reza Baqir, Governor, State Bank of Pakistan (SBP), and Murtaza Syed, Deputy Governor, SBP, be declared devoid of transparency and accountability.
The petitioner argued that economic decision-making should not jeopardize future economic development nor negatively impact the lives of Pakistani citizens.
Chief Justice Supreme Court Bandial had previously removed objections raised by the Registrar’s Office in April 2021. However, during the hearing, the Chief Justice cautioned the petitioner’s counsel against involving the Supreme Court in economic and financial matters.
He noted that Pakistan is already facing a difficult economic situation, and it is not the right time for the Supreme Court to hear such issues. The Chief Justice suggested that the federal government is an appropriate forum to manage the country’s economy.
Dr. Zubair’s petition also mentioned that in the fiscal year 2019-20, the federal government spent a record amount on interest payments due to the decision to raise interest rates.
This decision unnecessarily exposed the financial system and the foreign exchange market to high risks of instability. The government spent Rs2,709 billion on interest payments, nearly two-thirds of all tax revenue receipts collected in the Financial Year 2019-20.
The unjustified interest rate increase negatively impacted industry, trade, commerce, transport, and construction. Large-scale manufacturing declined by four percent (July-December Financial Year 2019-2020).
Instead, it encouraged foreigners and a few Pakistanis to invest in interest-bearing instruments, contrary to constitutional and Islamic injunctions, to avoid and refrain from the business of usury and interest rates.
Dr. Zubair argued that harmful policies were adopted by an economic team that was not legally appointed and acted beyond their authority. This team did not act in the interest of Pakistan, creating a debt trap and an interest rate trap that threatened the stability of the foreign exchange market.
As a result, Pakistan has been placed at the mercy of foreign creditors, gravely compromising the independence and sovereignty of the country.