LONDON: Remarks made by Reza Baqir, the governor of the State Bank of Pakistan (SBP), about the benefits of currency devaluation for overseas Pakistanis have elicited strong criticism by citizens and economists back home.

At a dinner held in honour of the SBP governor in London by businessman Anil Mussarat, Mr Baqir touched on the issue of the depreciation of rupee and attempted to present it as some sort of silver lining for those overseas Pakistanis who send remittances to family members.

“The families of overseas Pakistanis in Pakistan benefit, because the volume of their hard-earned remittances are now increasing because of the exchange rate,” Mr Baqir said at the event on Monday.

“Let me explain the quantum of this. Though some lose out from the exchange rate increase, some also benefit. For example, if in this year remittances are approximately $30 billion — we hope they are higher — and if our exchange rate depreciates even 10 per cent, then it translates to an additional $3 billion reaching families of overseas Pakistanis in Pakistan. In every economic policy, there are advantages for some and disadvantages for others,” he said.

SBP governor’s comment termed ‘most irresponsible’

He also said, “Obviously, those who buy imported items are facing difficulties. Those who have the ability to go on foreign trips or buy very expensive imported things obviously will be squeezed. But there are those who have benefited, and those are the families of overseas Pakistanis in Pakistan.”

His remarks were recorded by journalists present at the interaction, and a video of his short press briefing went viral on social media. Many users questioned how the governor of the State Bank can praise the devaluation of his own currency.

One user pointed out that devaluation does not rehabilitate economies, but instead raises debt, cost of imports and slows down economic activities.

On Twitter, Uzair Younus, host of a podcast on Pakistan’s economic landscape, posted, “Arguing that a depreciating currency benefits families of overseas Pakistanis is a very weak argument. For starters, these flows represent at most 15 per cent of household income for a small fraction of households, as per PBS. Also, inflation eats into much of the gain experienced.”

“I know the latter because I’m one of the overseas Pakistanis whose remittances complement household incomes. Rising electricity, petrol [and] food prices don’t really leave much to gain. It’s amazing that the central bank governor, usually so measured, would use this logic.”

Commenting on Mr Baqir’s remarks, political economist and IBA’s executive director Akbar Zaidi told Dawn, “It is the most irresponsible comment that any public official can make. It shows how the governor of SBP is pandering to the PTI government’s obsession with overseas Pakistani at the cost of Pakistanis at home in the hope that the few who vote will vote for PTI. Secondly, the SBP governor and deputy governor are both from the IMF and are following simply what IMF wants, i.e. to let the rupee devalue. This is not even spin or intelligent spin. Someone in his position could have done this far better.”

Mr Baqir arrived in London from Washington DC, where he had accompanied Shaukat Tarin for ongoing talks with the IMF. Mr Baqir attended two events, one in London and the other in Manchester, where he was pushed by reporters on rising inflation in the country.

“Inflation is a global challenge in every country. In America, there is more inflation today than 20/30 years ago,” he said in response to one question. He added that rising oil prices had also caused inflation in Pakistan.

An IMF economist, Mr Baqir was appointed SBP governor in May 2019 for a three-year term. An Aitchison alumnus, Dr Baqir earned his PhD from the University of California, Berkeley, in Economics and has worked with the IMF for 18 years. He was the chief of the IMF’s Debt Policy Division and worked on IMF policies on external debt sustainability and restructuring of member countries.

Mr Baqir’s continuing role in the IMF raised questions after his appointment, but a federal minister said he had resigned from the Fund to become the governor of the central bank.

When contacted, the State Bank spokesman was not available to offer any comment.

Published in Dawn, October 22nd, 2021