The deadline for appointing a governor of the State Bank of Pakistan expired on Monday amidst rumours that the three leading contenders for the position might be passed over in favour of a dark horse candidate.
According to the State Bank Act of 1956, the government is mandated to appoint a new governor “within a period not exceeding three months.” Prime Minister Yousaf Raza Gilani had accepted the previous incumbent Shahid Kardar’s resignation on July 15.
“The SBP governor’s appointment was not finalised on Monday. We have to wait for some more days,” said Farhatullah Babar, spokesperson for President Asif Ali Zardari.
Babar tried to justify the violation of the law and said that clause 54B of the SBP Act empowers the government to issue appropriate orders for the removal of any difficulty that may arise in the implementation of the law. The government, however, had not issued any such orders till the filing of this story.
Legal experts argue that even though the government had violated the law, there would be no repercussions. “There is no penal provision [in the act] except that the government is violating an act of the Parliament,” said Ali Zafar, an Islamabad-based corporate lawyer.
A four-way race?
The three leading contenders for the position are acting governor Yaseen Anwar, former SBP governor Shamshad Akhtar and National Bank of Pakistan Chairman Ali Raza. However, a senior government official said that there was a fourth ‘dark horse’ being considered for the position, but refused to provide further details, saying that the decision was the prerogative of the president.
The acting governor in particular appears to be keen on getting the job he is currently filling in for. Sources told The Express Tribune that the Presidency had summoned Anwar on October 7 – one day before the SBP announced its surprise 1.5% cut in the benchmark interest rates – reportedly to ‘inform’ him of the government’s decision to lower rates.
That ‘decision’ was lambasted by independent economists as politically motivated and potentially detrimental to the country’s macroeconomic stability.
Central banks are ordinarily meant to be independent and resist pressure from governments to move interest rates up or down due to political reasons but Anwar is described by many sources as a “non-assertive personality” who engaged in an “act of appeasement” to be appointed SBP governor.
Anwar’s weakness may be a strength in the race, though. With election season rolling around, the government appears to be in search of a candidate who will go along with what the administration needs, not necessarily what makes sense for sound management of the economy, said one person familiar with the matter.
The finance ministry appears to favour Ali Raza, said sources. Ali Raza is the brother of Salim Raza, the man who was SBP governor before Kardar and one of the two men who resigned prematurely from their term as head of the central bank owing to policy differences with the government. Ali Raza, however, may be too old for the job.
Shamshad Akhtar, who was Salim Raza’s predecessor, has a lot of credibility among economists, having been the governor who almost refused to hand over blank checks to the finance ministry during the government’s self-inflicted financial crisis of 2008. Needless to say, however, she is not popular with the finance ministry.
Kardar was the 16th governor of the SBP, and the third under the current administration. Sources said he resigned due to his opposition to the inclusion of the finance secretary (the highest ranking civil servant in the finance ministry) on the SBP Central Board, the body that makes decisions on interest rates. Kardar felt that the finance secretary’s presence on the board was an inherent conflict of interest that compromised the integrity and independence of the central bank.
Published in The Express Tribune, October 18th, 2011.
More in PakistanPetitions: ‘Ombudsman’s decisions’ of no value