Reasons why boss always right

The State Bank of Pakistan is witnessing the exit of its third governor since the current government took office after Feb 18, 2008 elections, and this time around, the outgoing governor has cited, "differences of opinion on policy actions and on implementation of certain directions" as reasons behind his resignation.
This resignation stands in stark contrast to that submitted by Shahid H. Kardars predecessor, Salim Raza, who walked out on the job for "personal reasons".
But, however different the parting words of each of the two might be, it strongly appears that the fundamental reason behind their exit is falling out of favour with the boss.
Just what rubbed the boss the wrong way will perhaps always remain debatable. After all, politicians are well adept at showing right when striking left.
What is known is that Salim Raza had been reluctant in issuing a licence to Sindh Bank. Informed sources also contend that Raza had initiated audits of accounts of many of the Presidents friends and associates, shortly before departing from the office.
While Sindh Bank did eventually receive necessary approvals, under Shahid H. Kardar, the banks minimum capital requirement was set at Rs10 billion, compared to Rs 6 billion for other banks in the industry.
SBP also objected to the issuance of advances by the bank to private parties and instead directed it to park deposits into treasury bills. The icing on the cake came in the form of the central banks scrutiny of Sindh Banks human resources, all the way down to grade 3 officers.
But before the Sindh Bank is perceived as a jinx for central bankers, it is pertinent to note that there are other reasons over which differences could have emerged between Kardar and his boss.
Back in December 2010, President Zardari successfully persuaded the Chinese government to initiate a currency swap with Pakistan under which the two countries would trade in local currencies instead of US dollar. This mechanism is already being employed between China and Taiwan as well as in some other parts of the world.
The concept is comparable to the United States Public Law 480 also known as Food for Peace and commonly abbreviated PL480, under which the US government sells food commodities to countries such as Pakistan and then uses the proceeds from these sales for USAID-directed developmental projects in the country.
Pakistans policymakers have so far remained unable to convince their Chinese counterparts to buy governments T-bills with the proceeds they earn through exports to Pakistan. Seven months have come and gone since this agreement was reached on a governmental level, yet little progress has emerged over the specific framework for the swap. It is likely that this delay could have invited the Presidents ire for the outgoing governor.
This becomes even more plausible given that the country is vying for similar arrangements with Turkey and Sri Lanka, with a view to reducing the countrys vulnerability to dollar reserves as well as securing foreign investment to spur economic growth.
When all is said and done, Shahid H. Kardar perhaps enjoyed more access to the fiscal quarters than all his predecessors did. He took active part in the formulation of this years budget and was even present when the Prime Minister signed the Finance Bill 2011. By comparison, both SBP governors, Ishrat Husain and Shamshad Akhtar would often complain about lack of consultation on governments fiscal policy decisions.
In fact, BR Research has learnt that Finance Minister Dr Hafeez Sheikh was also annoyed by Kardars "whimsical" decision to resign from office. However, Kardar had very little choice. After all his guarantor defence minister Ahmad Mukhtar could not ensure prior consultation on monetary policy stance with the leader of his party. The surety or warrant for appointment had it as a condition.
Whatever the reasons for his early departure may be, Shahid Kardars exit has put up the vacancy board outside the central bank governors office.
Given the testing times that the country is faced with, it is imperative that the spot is filled soon with a candidate who not only has stellar economic as well as management skills but also ability to show adaptability and flexibility.
But perhaps the most important lesson for the new apex regulator will be that the boss is always right.