Policy differences with the finance ministry and the presidency, institutional politics and resistance from the federal bureaucracy are being blamed for the resignation of Shahid Hafiz Kardar, the third governor of the State Bank of Pakistan to leave office under the current administration, and the second to resign prematurely.
Sources familiar with the matter describe it as a “steadily developing situation”, adding that his resignation has paved the way for the appointment of a “loyal and dutiful” head of the central bank, who would be more willing to support policies initiated by the government.
Surprisingly, however, sources said that setting interest rates, the primary task of the central bank, was not a big area of policy differences and was not part of the reasons that forced the governor out.
Kardar’s brief tenure as governor of the SBP was marked by his open opposition to what he considered the government’s poor fiscal management. The bimonthly monetary policy announcements from the central bank under Kardar’s time in office included scathing criticisms of the finance ministry’s management of the economy.
“Shahid Kardar ...would not compromise on principle,” said one source inside the presidency.
The timing of Kardar’s resignation could not have been worse, added the source. The government is about enter into negotiations with the International Monetary Fund later this month for the restoration of the $11.3 billion bailout programme.
While Kardar is reported to have resigned on Tuesday, the government has not yet made any official announcements, though officials have not denied the reports either. Sources in the presidency say that the government is likely to name a successor over the next 48 hours.
Sources said that one of the reasons for the governor’s departure was his policy differences with President Asif Ali Zardari.
Published in The Express Tribune, July 15th, 2011.