ISLAMABAD:
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.
(Read: Resignation of SBP governor)
“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.
(Read: Explaining the rate cut - A case of contrasting styles)
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.
COMMENTS (15)
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@Nadeem: Thanks bro, getting old and it is usually very late in the night here and I am half asleep, in bed in the dark. Being a student of science all my life, perhaps my sub conscience confines me to scientific terms only. Or it is the spell checker that changes my misspelled word to the angle. Be that as it may, your point is well taken, and appreciated. I am amazed that your post was helpful, positive and not attacking! Thanks and regards, Mirza
The probable appointment will be Ali Raza as the government wants a compliant Governor.
this governments incompetent. shamshad akhtar is a good choice because she was very successful, but she butted heads with this government. she did her work during the previous government, where she was given space to carry out what was in the interest of the country.
It is completely wrong to think that a banker from whatever bank makes a good central banker. He/She needs to be a first-class macroeconomist with a keen understanding of international economic developments.
OBVIOUSLY they are going to appoint someone who, in their judgement, will be supine and cooperative and cut interest rates some more as though this will stimulate growth.
I agree that the Central Board of the SBP has many people (including a business-person) who have no business being there and whose presence constitutes conflict of interest. But we have never been worried by such technicalities.
Mr Zakir Mahmood of HBL is one name that is floating around the right circles
@tauseef: You are right. Plus tell me why are Citibankers always trying to become SBP Governors, Finance Ministers and Prime Ministers. Does sun out of their behind??? If these bankers made Citibank bankrupt and had to be bailed out by US taxpayer, ostensibly they are not that smart. Look at the state in which Shaukat Aziz, Salim Raza left us??
the dark horse always wins in Pakistan...starting with the highest office...
Yaseen Anwar should be made the Governor
@Mirza: Mirza, please run spell checker. You consistently spell 'angel' as 'angle'. The latter, as you know, is a geometric measure of how two lines instersect and has nothing to do with the beings in heaven.
You will have difficulty in finding an SBP governor. Why? For the simple reason, what you want is a 'yes man' who will go around printing notes and lend the GOP money for its extravagance. Three governors have resigned and the GOP is still defying the law in force by being absent-minded.
Why does the PPP not appoint Raja Parvez Ashraf SBP governor? The genius of the IPPs? Salams.
Why make any appointment PML-N with the help of courts would veto them. Even if PPP appoints an angle PML-N would say no just to show their undemocratic nature. This is called ruling via backdoor.
The dice has been rolled. What is to follow is inconsequential. Over the last 63 each successive Government has destroyed its predecessor doings, even if they were good for the country. The worst was ZAB's nationalizations; among which Eduction bore the brunt of his blunt political instrument. That destroyed our ability to produce three generation of engineers, doctors and administrators for the country. The intelligentsia. Now we are surrounded by duffers who can't grasp why things are not in our control. It really is too late. Sorry to say that. Many nations have died in the history of the world. We are facing a death of another one in real time.
Citibank executive Shahzad Kazi nephew of former state bank governor A.G.N. Kazi is one of the candidates who is being considered.
He has to be a friend of Mr Zardari, even a classmate with a history of corruption which everybody knows but not proven in a court, forget merit, qualifications and experience.