Central Bank Clash Prompts Pakistan to Fill Governor Post

Updated on
  • Riazuddin was made acting governor until permanent appointment
  • Bajwa to face deteriorating external position: SC’s Bilal Khan

Pakistan named former finance secretary and tax agency chief Tariq Bajwa as central bank governor following a clash between the government and monetary authority this week after the apparent devaluation of the nation’s currency.

Bajwa, 53, will replace the State Bank of Pakistan’s Acting Governor Riaz Riazuddin, he said in a phone interview on Friday.The nation’s finance ministry confirmed the appointment later in a statement.

“I have been communicated to and I want to join as soon as possible, maybe in a day or two,” said Bajwa, who has held key positions in the administration of Prime Minister Nawaz Sharif and is seen as loyal to Finance Minister Ishaq Dar. “It’s another big task.”

The appointment comes after Dar blamed the 3.1 percent tumble in the rupee against the dollar on Wednesday, the worst fall in nine years, to a “miscommunication” by individuals and institutions. Dar told reporters on Thursday that the deputy governor of the central bank wasn’t aware of adjustment in the managed currency and said he would appoint a full-time governor as early as possible.

The appointment, made amid tensions between the central bank and government, prompted some analysts to question the monetary authority’s independence going forward.

“Since the selection and job of the central bank governor is not being advertised and there is no panel to assess the new governor, in our view, it would be difficult for the governor to work independently,” said Muzzammil Aslam, chief executive officer of EFG-Hermes Pakistan Ltd.

The rupee gained 0.4 percent to 105.5 at 11 a.m. local time.

‘Pressing Challenge’

Former governor Ashraf Wathra, who completed his term in April, introduced South Asia’s first independent monetary policy committee and steered interest rates lower in the oil importing nation after crude prices dived. Bajwa will be taking the helm as South Asia’s second-largest economy faces headwinds, with the current account deficit widening in the past 11 months through May to $10.6 billion, primarily on the back of falling exports.

“The most-pressing challenge for the central bank’s governor will be managing the country’s deteriorating external position,” said Bilal Khan, a senior Karachi-based economist at Standard Chartered Plc.

Sharif’s government has ushered in a period of relative stability since 2013, with the economy expanding at a rate of over 5 percent annually. That came with the help of an International Monetary Fund’s bailout to resolve a balance-of-payments crisis four years ago. China is also financing infrastructure projects across the country valued at more than $50 billion.

While the current account gap is mounting, currency management would be a key challenge for the incoming governor, said Mohammed Sohail, chief executive officer at Topline Securities Pakistan Ltd. in Karachi.

(Updates with analyst comment in sixth paragraph.)
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