OPINION
Ariba Shahid
The last days of Governor Baqir
“H
is term is about to end and we will not retain him,” said Khawaja Muhammad Asif while speaking about Dr Reza Baqir’s term as governor State Bank of Pakistan, expected to end in early May. This was said while Dr Baqir was already in Washington in talks with the International Monetary Fund (IMF) waiting to be joined by Miftah Ismail, newly appointed Finance Minister. The talk and negotiations with the IMF focuses on proposals for the next budget. If successful, Pakistan will receive a $1 billion installment from the IMF. While it was a known fact that Baqir’s term was coming to an end, had the Imran Khan government not been ousted, there were strong chances for him to be given an extension or in other words for him to continue as governor for another term. However, with a new government coming in, there were rumors afloat on Shehbaz Sharif not being keen on keeping him as governor SBP even though Miftah Ismail thought he should continue. There has been no public statement by the both of them on this.
Bad timing
T
he delegation from Pakistan could have faced a hurdle in the form of the IMF saying it would continue negotiations once a new governor comes in. Moreover, Asif’s statement further undermines Pakistan’s negotiating power by going
The writer is a business journalist at Profit. She can be reached at ariba.shahid@ pakistantoday.com.pk or at twitter.com/AribaShahid
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live on television and saying that the law giving autonomy to the SBP will definetly be reversed. Need you be reminded that the IMF has heavily stressed on an autonomous central bank, making it imperative for its program. The timing becomes even worse considering the mass subsidies given out by the previous administration despite agreeing to austerity measures in compliance with the IMF program. While one can debate on whether or not the governor should stay, the length of the tenure, etc; one cannot ignore the carelessness of Asif’s statement. The statement basically makes Pakistan’s position weak in front of the IMF yet again. Previously, the IMF issued a statement saying “Once a new government is formed, we will enquire about intentions vis-a-vis programme engagement.” This essentially takes away all negotiation power away from Baqir and the Pakistan delegation. It also does not send out the right message.
What does this really mean?
I
n the past when the Central Bank wasn’t legally autonomous, it mattered who led the central bank, especially if you were in government. Let’s flash back to 2017, when Tariq Bajwa was appointed as governor. The move was questioned considering the timing. The rupee had plunged 3.1% against the dollar earlier that week, which did not sit well with Ishaq Dar, the finance minister of the time, who believed in a heavily managed exchange rate. While Tariq Bajwa was appointed as a replacement for acting governor Riaz Riazuddin, it is important to note that the reason for the immediate change was because the finance ministry felt the need to be able to call shots at the SBP. The SBP, like any other central bank, however needs to be autonomous for the greater good of the nation’s economic policies. This prevents it from being clouded by political interference,
pressure, and populist moves.
The signal
T
he decision to not continue with Baqir proves to be a strong signal. It shows that the government will try to move towards a fixed exchange rate, as opposed to the current scenario where the SBP intervenes when it deems absolutely necessary. Baqir has been a strong proponent of a market determined exchange rate and has often been found thanking the government for being on board with the decision to let the rupee depreciate. He is also often found saying that if the rupee could withstand a major shock like covid, it can withstand other economic challenges as and when they come.
