Shahid Kardar to be named new SBP chief

ISLAMABAD: The government is likely to notify Shahid Hafeez Kardar as the central bank governor in a couple of days. Kardar, who served as the Punjab finance minister during the Musharraf regime, is a chartered accountant by profession.

The immediate challenge confronting the new State Bank governor is maintaining equilibrium between providing financing to government and controlling inflation.

The finance ministry is also looking towards the central bank to get much-needed funds to initiate the rehabilitation process in the flood-hit areas, which may prove to be difficult in the face of dwindling revenues and the world’s reluctance to extend hard cash for reconstruction.

The new governor would be in a bind – if he refuses to print new currency notes it may hurt the pace of the reconstruction process and if he does, he will be fueling inflation.

Industrialists term the strategy faulty, saying that it compels businessman to pay the price for the sins of the government. Over the past two months, the government has borrowed Rs130 billion from the central bank to meet its soaring expenditures.

“The biggest challenge for any new governor would be managing government borrowing,” said Dr Ishrat Hussain, a former State Bank governor. He cautioned that the economy, already hit hard by the war on terror, has been crippled by floods. “These are no normal circumstances and it will not be easy to manage all of them at once.”

“I have no confirmation yet,” said Shahid H Kardar while talking to The Express Tribune. He, however, said: “I can do two terms and I have no issues,” which may become a hurdle in the appointment. Under the State Bank Act, no one can head the SBP if he is ineligible for a second three-year term. The maximum age requirement is 59 years so that the governor could secure the second term before retiring at the age of 65. The government also failed to appoint the new governor before September 3, within three months of the post falling vacant in accordance with the State Bank Act.

The government violated this law when it appointed Syed Salim Raza at the age of 62 plus.

Shahid Kardar has held a meeting with Prime Minister Syed Yusuf Raza Gilani. Defence Minister Chaudhry Ahmad Mukthar introduced him to the premier. This led to rumours that the Finance Minister Hafeez Shaikh was not happy with new development. Nonetheless, an official of the Finance Ministry said that the government had “consulted the finance minister before the appointment”.

Published in The Express Tribune, September 8^th, 2010.