KARACHI: Dr Reza Baqir, the former governor of State Bank of Pakistan (SBP), was appreciated and criticised as his term came to an end. However, the perception that the SBP become a supporter of the rich and big businesses under his command has grown stronger.

Dr Baqir completed his three-year term and has been replaced by the Deputy Governor Dr Murtaza Syed who will be heading the central bank as an acting governor effective May 5, anncounced a circular issued on Thursday.

On May 3, Finance Minister Miftah Ismail in a tweet announced that as the term of Governor SBP Dr Baqir has come to an end, as per the law senior most deputy governor takes over.

Therefore, Mr Murtaza Syed, an eminently qualified economist with rich International Monetary Fund (IMF) experience, will take over as acting governor SBP.

The much-trumpted and appreciated Temporary Economic Finance Facility (TERF) also came under severe criticism by economists and analysts.

“The SBP under Dr Baqir’s governorship provided about Rs500 billion at one per cent to support trade and industry to save them from the shocks of Covid-19 pandemic and now the government is borrowing at 15pc,” said a senior banker, not willing to be identified. Those who received large sums of money at 1pc interest automatically became wealthy and earned billions simply by the difference in interest rates, he added.

Not only that, but it was more important to note who was given such a large sum of money, mostly to the wealthy and for ten years, making them even wealthier, critics opined.

Opinions are divided since many analysts believe the cheap financing will pay in the future and exports will go higher.

He also acknowledged that he was making late decisions about interest rates. The interest rate was increased by 250 basis points last month when the Treasury Bills (T-bills) rate was much higher than the interest rate. The same situation has now developed. The T-bill rate is 14.99pc and the interest rate is 12.25pc, but the decision is yet to be taken.

Researchers and bankers were also critical about Dr Baqir being too pro-government as he never criticised the government or the Finance Ministry while seeing the government was on the wrong track.

“The new governor is required to criticise and advise the government and the ministry of finance in their reports,” said Mohammad Sohail, the CEO of Topline Securities.

However, Dr Baqir’s initiative for free flotation of the exchange rate could not live up to the expectations of the market since the dollar commanded the exchange rate in its favour. The rupee is now much weaker than a year ago. However, the SBP argues that during Dr Baqir’s tenure, many factors were there to depreciate the rupee. One of the main causes was the very high demand for dollars due to unexpectedly high oil prices globally and all other commodities facing a super cycle of high prices. It collectively increased the import bill by 41pc over last year.

While many criticise the free flotation of the free exchange rate, Mr Sohail said the exchange rate should be market driven. He also suggested the new governor keep the exchange rare market driven.

“Dr Syed is highly qualified and fit for the new job as governor SBP. The acting governor should keep interacting with the market players,” he said.

He suggested that the new governor should keep interacting with market players and make it possible to release data on time.

He said there is a need to clear the perception that the SBP is the supporter of big businesses. The new governor must bring down inflation to 5-7pc, he added.

Head of Research at Arif Habib Limited, Tahir Abbas said the acting governor also has a very good relationship with the analyst community and journalists, making it easier for investors to have a clear investment and policy outlook.

“The acting governor of SBP worked side by side with the last governor with a key focus on Covid-19 relief package and monetary policy settings. Dr Syed has over 20 years of experience, including approximately 15 years with the IMF. He is capable of handling the current situation,” said Mr Abbas.

In the last three years, under the supervision of Mr Baqir, some key decisions were taken to steer the economy towards growth, said Mr Abbas.

The central bank took bold policy rate decisions, from rate cuts during peak Covid to rate hikes post V-shaped recovery, as per the needs of the economic situation, he said.

He said relief and incentive measures such as TERF, employee retention scheme, loan extension and deferment schemes were taken during Covid to ensure economic growth does not slow down, he said.

The Roshan Digital Account proved to be a silver lining during challenging times, with more than $4 billion flown into the economy by overseas Pakistanis, he added.

He said special focus was given to digitisation with initiatives such as RAAST and also promoted start-up and fintech culture in the economy.

The introduction of a market-based exchange rate regime made sure that the currency remained the first line of defence against external account pressures, he said, adding that coming up with investment products like Naya Pakistan Certificate too helped boost foreign investment in Pakistan.

“Financial inclusion and banking on equality, including women’s empowerment too, were key areas of focus of the SBP,” he said.

Published in Dawn, May 6th, 2022