EDITORIAL: The previous Governor State Bank of Pakistan Dr Reza Baqir’s term expired on 4 May 2022 and the same day new Finance Minister Miftah Ismail tweeted the following: “As the term of the SBP Governor has come to an end, as per law the senior most Deputy Governor takes over until. Therefore, Dr Murtaza Saeed, an eminently qualified economist with rich IMF experience, will take over as Governor SBP. I wish him the best in his new role.”
Since then, the central bank is without a tenured governor which extremely disconcerting when considered in view of the turbulence in the forex market where the Pakistan Rupee’s value against the US dollar has eroded significantly. The economic impasse facing the country has assumed legendary proportions with the rupee’s dramatic erosion with each passing day and a discount rate double the regional average with obvious repercussions on growth and consequently on tax collection. There is a consensus between the eleven-party coalition government and the previous government’s finance minister Shaukat Tarin on the need to ensure the success of the IMF’s seventh review.
In the event that the seventh review is successful, the SBP Governor, in the exercise of his own discretion with respect to the rupee’s external value and the discount rate as chair of the Monetary Policy Committee, will have to take far-reaching decisions that would have to be made by an acting governor. The next MPC (Monetary Policy Committee) meeting is scheduled to be held on 23 May. However, given the current turmoil in the currency and stock markets, it was imperative, in our opinion, to call it a lot sooner; perhaps it would have been only if a person with the security and validity of a tenure was at the helm. Hence the need for taking a decision on who will be the next SBP Governor without any further loss of time.
There is of course no legal bar on the present administration to appoint a tenured governor, but given the fractious state of our polity today, the appointment which is for five years, may generate an unnecessary controversy and may discourage qualified people of merit to accept such appointment that would render their persona controversial. Furthermore, there is no dearth of people to hold the view that the appointment of the next governor for a five-year term be made by a government with a full term ahead rather than one which may call for elections anytime before the end of term of this parliament by middle of 2023.
However, the parlous state of the economy does not allow for this luxury. Ideally, one would hope that this decision is taken by consensus between the three national party leaders but, leave alone interaction, there appears to be a level of animosity that precludes sitting in the same room. Failing this option, there is a need to legislate that the SBP Governor will require to be reconfirmed subsequent to the formation of the next government so that the present administration does appoint one or confirm the incumbent holding acting charge at present, to head the central bank. This is necessary to enable seamless decision making with respect to monetary policy irrespective of whether the seventh review is successful or not.
Copyright Business Recorder, 2022
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