The language was a lot milder than that of his predecessor but the message delivered by the State Bank of Pakistan (SBP) Governor, Yaseen Anwar, on February 11, was depressingly familiar: the government has not done nearly enough in terms of structural reforms to manage its budget deficit and, as a result, the rest of the country must suffer in the form of high inflation.
The central bank makes its monetary policy announcements — where it sets the benchmark interest rates for the country — in a publicly televised address, twice a year. These have historically been rather boring pronouncements of government statistics, followed by a decision. This trend was changed by Shahid Kardar (and to some extent even by Syed Salim Raza) who used these opportunities to publicly criticise the government for their failings in fiscal management. When Anwar took over as governor, it was feared that he may be unconfrontational, and indeed his speech was far more diplomatic than that of his predecessor.
But it appears that the SBP has transformed into a different entity altogether, more independent in spirit and unlikely to be cowed — at least in its analysis — by the finance ministry.
Unfortunately for the nation and the economy, the finance ministry seems to be stubborn in its insistence on creating financial plans for the entire country, based on assumptions that could only be described as whimsical. For instance, what makes the government think that Etisalat will pay the $800 million it owes Islamabad this year, when it has not done so at any time since 2006? And this fiscal year’s budget was made after the May 2 incident: what prompted the government to count on US assistance during the upcoming year?
It was disappointing, however, to note how the energy crisis hardly got a mention from the SBP governor. The government’s failure to resolve the crisis is the single biggest reason for both the federal fiscal deficit, as well as the slow rate of economic growth in the country. The governor’s — and the government’s — silence on the matter is deafening.
Published in The Express Tribune, February 14th, 2012.