Change seems to be the consistent state atop important institutions with head-shuffles at foreign, information, power, petroleum and finance ministries now being mimicked by change of guard at the SBP. And while specifics of Dr Kardar’s resignation are better left for more appropriate space, his confrontation with certain government circles betrayed concerning limitations to central bank autonomy, which is where most of Mr Yasin’s energies should now be invested in.
The new governor’s international banking experience is impressive. But we have already played host to a super-banker driven, hot-money centred policy mix before, with painfully obvious results. And even though he has played acting-governor before, it is his recent bulky interest rate reduction, in sharp contrast to Dr Kardar’s more hawkish outlook on inflation, that is more telling with regard to both policy direction and the bank’s independence. With chronic power shortage and far from comfortable inflation levels, the government seems to be the biggest immediate beneficiary of the easier money outlook, not industrial production or private sector investors. Yet despite his apparent easy gelling with Islamabad’s debt-addicted posture, he will quickly have to take a leaf out of his predecessor’s book and aggressively halt the rupee’s fast fall, or risk compromising the economy’s lifeline by making loan repayment harder.
That Mr Yasin is the fourth SBP governor in the government’s three-and-a-half years in power speaks loudly about policy implementation and continuation inefficiencies. The economy is already faltering because of unbearable exogenous strains. When central banks enforce influenced monetary policies, driven mainly to fund non-productive government borrowing, their printing presses unleash devastating inflation, especially when low growth and weak employment fail to trigger consumer activity. We will know very quickly which direction the new governor is about to steer the SBP towards. If he does not immediately assert SBP autonomy, the fourth change will be about just as good, at least in terms of results, as the previous three.