SBP: Governor with a spine

The State Bank of Pakistan is one and perhaps the only institution which economists and analysts used to mark as a star in selling Pakistan's glory in the last decade. The central bank's journey of revamping from a typical government organization to an independent and autonomous institution started from 1993 when Dr M Yaqub took charge. Prior to that, it was subservient to the Ministry of Finance; albeit, there were seasoned administrators, like Ghulam Ishaq Khan and others, at the helm.

Dr Ishrat Hussain during his full two terms was instrumental in overhauling the institution and picked the best brains to build the team. In 2000s, when banking deregulation took place, the SBP became star of regulators. The institution was strengthened by not only with sound banking and monitory regulations; but also with a reliable IT infrastructure.

Shamshad Akhtar, a workaholic, took the reins from Dr Ishrat hired young and vibrant economists and bankers.

She never really wilted to government pressure and took bold and right decisions.This never suited democratic government. Her caliber was never in doubt as she now serves as Executive Secretary of the United Nations Economic and Social Commission for Asia and the Pacific - it's the highest non political position at the UN.

Her departure, however, was the tipping point and marked the beginning of SBP's institutional decline. All the three governors from 1993-2009 had served in international financial institutions including the IMF, World Bank and the UN. Hence, these leaders were of the right stature to deal with other central bankers and negotiate with multilateral institutions including the IMF.

Then the politically appeasing appointments became a norm. Now the position is vacant again. Whoever assumes the role, needs to stand tall and guard the SBP's autonomy and independence from the finance ministry.

The monetary policy should be once again made truly independent. He/she would be well advised to liberalize the exchange rate policy, and work on improving quality of growth by enhancing financial inclusiveness and giving incentives to the right industries.

BR Research wishes them good luck for the new position and hopes that he/she would be able to bring back good human resource to the institution by making it truly independent.