NAWAIWAQT GROUP
 
 
 
Resigned to the worst
 
February 01, 2014
 
 

The resignation of Yaseen Anwar as Governor of the State Bank of Pakistan raises the unanswered questions regarding the role of SBP in managing the economy once more. The SBP is supposed to be autonomous and is tasked with two very important functions; printing Pakistan’s money, and setting interest rates that banks are then supposed to follow. The amount of money available in the market obviously has a huge impact of the value of the rupee, and a glut of money available to the public inevitably leads to increased rates of inflation. Interest rates set by the SBP encourage or discourage both spending and saving in various ways, and can be used to direct the flow of the economy. Needless to say, the decisions of the SBP Governor, along with the Finance Minister have a tangible effect on the economy of Pakistan.
Reportedly, this resignation came about because of disagreements between Anwar, and Dar, the Finance Minister. The Governor has a responsibility to look out for the entire banking sector of the country, as all commercial banks come under the ambit of the SBP. PML-N’s recent initiatives such as the Youth Loan Scheme are populist schemes orchestrated for the sole purpose of gaining political support, and have a slim chance of improving the economy. In addition, the Youth Loan Scheme is different form measures such as the Benazir Income Support because there were no funds allotted for the Prime Minister’s ingenious plan in the budget, and that means that the responsibility to provide these loans is shunted off to banks that will invest their money, along with that of their customers, in a scheme that they has no guarantee of paying dividends. One of the deputies of SBP, recently hired by Ishaq Dar was also reportedly one of the causes for Anwar’s departure. The deputy’s resume allegedly has no hint of any experience in the financial sector, and his appointment was clearly not based on merit.
As is the case with everything else in Pakistan, previous governments have regularly overstepped their mandate and enforced their will on matters that the SBP is supposed to have complete independence over, such as printing money. This government is no different, and basically considers the SBP to be its personal kitty. The financial decisions that are supposed to lie in the hands of the Governor are handled unilaterally by the Finance Minister, and other ‘key’ members of the government. Nawaz Sharif had inherited this Governor from the previous PPP regime and kept him because there were seemingly no other candidates at the time. So what’s the plan now? The IMF talks are looming once more, and for now, one of the deputies has been delegated to oversee them. But, a new Governor needs to be appointed in the next three months, and let’s hope that the state is up to making a decision that is bound to have a huge impact on the economy of the country.

 
 
on epaper page 6
 
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