Pakistan fires its central bank Governor and appoints a new one

The weekend was action packed in Pakistan. The Government removed both the central bank governor and head of Tax body:

Pakistan’s government has fired the governor of the central bank and the chairman of the tax collection body, two senior government officials told Reuters on Friday, in another setback to efforts to tackle economic turmoil.

The removal of the two comes only weeks after Finance Minister Asad Umar was asked to step down amid vital bailout negotiations with the International Monetary Fund, suggesting the government wants to overhaul its financial team amid weakening growth rates and soaring inflation.

“The government has decided to remove the governor of the State Bank and the chairman of FBR,” a Finance Ministry source said, referring to State Bank of Pakistan Chairman Tariq Bajwa and Federal Bureau of Revenue Chairman Jahanzeb Khan. A source at the prime minister’s office confirmed both had been sacked.

Central bank spokesman Abid Qamar told Reuters that Bajwa had “resigned”, and that it was unclear who would replace him.

Bajwa, appointed governor in 2017 during the tenure of the previous government, was one of the key figures in Pakistan’s ongoing bailout negotiations with the IMF. He was also seen to be close to Ishaq Dar, the former finance minister who appointed him and who championed a “strong rupee” policy that many analysts blame for Pakistan’s current economic woes, including ballooning budget and current account deficits.

The Government appointed a new Governor – Dr Reze Baqir,of IMF:

Dr. Reza Baqir has assumed the charge of Governor State Bank of Pakistan after President of Pakistan appointed him as Governor State Bank of Pakistan for a period of three years in pursuance of Section 10(3) of the State Bank of Pakistan Act 1956.

Dr. Reza Baqir has eighteen years of experience with the IMF and two years with the world Bank. He was the Head of the IMF’s Office in Egypt and Senior Resident Representative since August 2017. He has also held positions as IMF Mission Chief for Romania and Bulgaria, Division Chief of the IMF’s Debt Policy Division, Head of the IMF delegation to the Paris Club, Deputy Division Chief of the IMF’s Emerging Markets Division, IMF Resident Representative to the Philippines, and numerous other positions.

Dr. Baqir’s research has been published in top journals of the economics profession, including the Journal of Political Economy and the Quarterly Journal of Economics. Dr. Baqir holds a Ph.D in Economics from the University of California at Berkeley and an A.B. (Magna cum Laude) in Economics from Harvard University.

Not surprisingly, the opposition parties have called the appointment as new colonisation:

Pakistan Peoples Party Senator Raza Rabbani on Sunday branded the International Monetary Fund (IMF) as the “new East India Company”, adding that the appointment of the Fund’s Dr Reza Baqir as new governor of the State Bank of Pakistan (SBP) was “deplorable” and akin to “colonisation of Pakistan by international financial imperialists”.

The former Senate chairman said that “the SBP governor being an employee of the Fund which is giving a bailout package is a conflict of interest as it is obvious that his loyalties will not be with Pakistan.”

He said “it is a matter of shame that provincial finance ministers were made to appear before a middle ranking officer of the IMF (Baqir) and make promises of good behaviour.”

Rabbani said that Baqir’s appointment coupled with Dr Abdul Hafeez Shaikh’s induction into the cabinet as the prime minister’s adviser on finance means that the IMF has its “men in place” and “Pakistan’s financial sovereignty and national security has been compromised.”

The senator’s sentiments were also echoed by PML-N Vice President Maryam Nawaz, who in a series of cryptic tweets suggested that the government has surrendered the economy to the IMF.

“We will not go to the IMF; we will instead call the IMF here and hand over Pakistan to them,” Nawaz said, sarcastically referring to Prime Minister Imran Khan’s pre-election statements of never asking the Fund for another package when in power.

How politicians first mess up economy and then look for scapegoats. And how most of the time the scapegoat is the central banker who most likely would have warned of the economic mess for a while.

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