ISLAMABAD: State Bank of Pakistan (SBP) Governor Tariq Bajwa on Friday stepped down from his post after Prime Minister Imran Khan sought his resignation while Federal Board of Revenue (FBR) Chairman Jehanzeb Khan has also been transferred.
Dr Reza Baqir, who is currently serving at the International Monetary Fund (IMF), is likely to become the new head of the central bank, sources told The Express Tribune.
The office of the SBP governor has confirmed the development.
The prime minister does not have the powers to remove the governor of the central bank except in certain circumstances that are defined in the SBP Act of 1956.
Bajwa was holding a statutory position for a period of three years that would have ended on July 6, 2020.
Jehanzeb Khan, an officer of the Pakistan Administrative Service (PAS), is likely to be replaced by someone from the tax machinery, possibly a Customs Service Group official, the sources added.
Despite repeated attempts, Adviser to the PM on Finance Dr Abdul Hafeez Shaikh did not respond to questions about the reasons behind the move.
Sources close to Bajwa told The Express Tribune that the governor did not resist the government’s decision because of the prevailing macroeconomic conditions.
A confrontation between the federal government and the governor could have created uncertainty and that is why Bajwa decided to quit gracefully, the sources added.
The decision to remove the heads of two important economic policymaking institutions has been taken after Dr Shaikh expressed his desire to bring his own team.
The prime minister has already unceremoniously removed Asad Umar as the finance minister about two weeks ago.
These changes are taking place at a time when Pakistan is in midst of negotiations with the IMF for a bailout package.
There has been resentment in the federal cabinet over the decision to continue with the people who had served with former finance minister Ishaq Dar.
Dr Baqir, who is being tipped as the new SBP governor, is a Pakistani by birth and currently serving as the senior resident representative of the IMF in Egypt. Dr Baqir had earlier visited Pakistan and met Prime Minister Imran Khan, the sources said.
Baqir has remained the IMF’s head of mission to Romania and is working with the global lender since 2000 when he was the head of its debt policy division.
His resume includes graduating from Harvard University; a PhD in economics from the University of California, Berkeley; and working with the World Bank, the Massachusetts Institute of Technology and the Union Bank of Switzerland.
If Baqir is appointed the new head of the SBP, both the adviser to the PM on finance and the central bank governor will be from the Bretton Woods institutions — the World Bank and the IMF. Dr Shaikh has also worked with the World Bank.
The Pakistan Muslim League-Nawaz (PML-N) government appointed Tariq Bajwa as the SBP governor on July 7, 2017. The SBP Act of 1956 empowers the president of Pakistan to appoint a governor for a term of three years
Bajwa retired from civil service in June 2017 as the finance secretary and was the third bureaucrat to be appointed the head of the central bank. He is the only Pakistani to have won the prestigious Littauer Fellowship. He earned the reputation of being a competent and upright officer during his civil service career. He was among a handful of officers whose reputation remained clean despite serving as the FBR chairman for two and a half years.
The new SBP governor will face the immediate challenge of negotiating a bailout package with his previous employer and implement its conditions on the monetary policy and exchange rates.
The sources said the prime minister agreed to replace the FBR chairman after resisting the move for months. Jehanzeb could be appointed the Economic Affairs Division secretary in place of Noor Ahmad.
Jehanzeb was unable to effectively run the FBR that is facing a record shortfall of Rs345 billion in just 10 months of this fiscal year. There was a lobby in the FBR that was unhappy over the appointment of a PAS officer as the chairman of the board.
There are two dedicated service groups — the Inland Revenue Service and the Customs Group. There are over half a dozen officers from both the services serving in grade-22 — the highest basic pay scale.
The sources said someone from the Customs Group, either in grade-21 or -22, could be appointed the new FBR chairman.
Former finance minister Asad Umar and current Minister of State for Finance Hammad Azhar also wanted Jehanzeb removed.