The Ministry of Finance has prepared two summaries for Prime Minister Shehbaz Sharif, recommending him to either give a second five-year term to State Bank Governor Dr Reza Baqir or pick one of the three names from a panel, including a senior official of the International Monetary Fund (IMF).

The ministry has not backed a proposal of the Prime Minister’s Office that called for giving extension to Baqir “until further orders”, which is legally not feasible.

The State Bank of Pakistan (SBP) Act 1956 does not provide legal room for any term shorter than five years under the amended law. In case the government decides to temporarily extend Baqir’s term till November or any other time, it will be deemed illegal, government sources told The Express Tribune.

In light of the legal position, the Ministry of Finance has prepared two separate summaries for the prime minister, leaving the final decision on his judgement. Finance Minister Miftah Ismail has said that the decision on the fate of SBP governor will be taken by the prime minister.

Sources said that the Ministry of Finance had proposed the name of Noor Ahmad, Pakistan’s Executive Director in the Asian Development Bank (ADB) and former federal secretary, for appointment as the next central bank governor.

The other two names in the panel are Aurangzeb Khan, President of Habib Bank Limited, and a senior IMF official.

Separately, it has recommended that Baqir’s tenure may be extended for five years after the expiry of his first term on May 4.

Sources said that the finance ministry was against extension of Baqir’s tenure as well as reappointment for five years but had to prepare a summary for reappointment after the PM’s Office desired that his tenure may be temporarily extended.

Government sources said that PM Sharif was facing pressure to extend Baqir’s tenure but the premier did not want to have him for five years. Baqir was earlier serving in the IMF and was picked three years ago to lead the central bank.

In case the PM would require more time for making his mind, the acting charge of central bank governor will be given to the senior most Deputy Governor, Dr Murtaza Syed – another IMF man, said a senior government official.

Baqir also met with PM Sharif but the PM’s Office did not issue any statement or visuals of the meeting.

The last government of Pakistan Tehreek-e-Insaf (PTI) had amended the SBP law under pressure from the IMF and the SBP, and extended the standard term of three years to five years, with the option of reappointment for another five years.

Sources said that there was strong resentment within the Pakistan Muslim League-Nawaz (PML-N) about giving extension to Baqir. Defence Minister Khawaja Muhammad Asif said at Capital Talk show that Baqir would quit on May 4 and the government did not need his services any more.

According to the SBP Act, the governor and the non-executive directors shall be appointed by the president, upon the recommendation of the federal government taking into account the eligibility and disqualification criteria laid down in this Act.

The decision on the SBP governor is expected to be made on Saturday (today), which is the last working day as Baqir’s tenure will end during Eid holidays, said a government official.

Finance Minister Miftah Ismail did not comment on this news story.

The PML-N has remained very critical of the policies of Baqir and its legislators have demanded an inquiry into the $3.6 billion hot foreign money brought in Pakistan during the first year of the governor’s term.

PML-N member of National Assembly Standing Committee on Finance, Qaiser Sheikh, has repeatedly demanded that a forensic audit of the hot foreign money inflows should be conducted.

Senator Saleem Mandviwalla of the Pakistan Peoples Party (PPP), who is also a member of PM Sharif’s Economic Advisory Council and a member of the standing committee on finance, has also moved a request in the Senate, seeking the formation of a parliamentary committee to determine whether any wrongdoing was done in the case of hot foreign money inflows.

Under the amended law, the SBP is now responsible for controlling inflation but it has been constantly revising the inflation target in deviation from the federal government inflation guidelines. The federal government has set the inflation target at 8% but the SBP in its last monetary policy statement revised upwards its forecast to over 11%.

There has also been criticism against the SBP for not cracking down on the banks that have been exploiting the federal government and extending loans at rates up to 2.5% over and above the SBP policy rate.

Baqir has caused huge damage to Pakistan’s economy and the government should say thank you to him on the completion of his term, said Dr Ashfaque Hasan Khan, a member of former PM Imran Khan’s Economic Advisory Council.

“The governor’s extension will also be seen as an endorsement of the PTI’s economic policies,” said an official on condition of anonymity.

Published in The Express Tribune, April 30th, 2022.

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