KARACHI: In a late-night notification, the finance division formally announced that Dr Reza Baqir of the International Monetary Fund (IMF) has been appointed governor of the State Bank of Pakistan (SBP) to serve for a three-year term.

For the post of Federal Board of Revenue (FBR) chairman, the guessing game continued over who the replacement will be.

An Aitchison alumnus, Dr Baqir earned his PhD from the University of California, Berkeley, in Economics and has worked with the IMF for the last 16 years. He has been the chief of the IMF’s Debt Policy Division and worked on IMF policies on external debt sustainability and restructuring of member countries. He has also helped design debt and fiscal policies for crisis-hit countries like Greece and Ukraine, among others. Before the IMF, Dr Baqir worked at the World Bank, the Massachusetts Institute of Technology and the Union Bank of Switzerland.

Announcement about appointment of FBR chairman still awaited

Dr Baqir will be the second IMF staffer to head the central bank. Before him Dr Mohammad Yaqub was also brought in from the IMF to head the State Bank from 1993 to 1999. Dr Yaqub built the architecture of an independent central bank before running into problems after the freezing of foreign currency accounts following the nuclear detonations in 1998 and subsequent sanctions. He was replaced by Dr Ishrat Husain from the World Bank who served two terms as well before being replaced by Dr Shamshad Akhtar from the Asian Development Bank.

Being an IMF insider, Dr Baqir’s appointment will raise some natural questions. Will he resign from the Fund to take up his new position, or remain an IMF employee while serving as State Bank governor? His predecessors from the multilateral agencies did not return to their former employers after leaving SBP governorship. How will he discharge his role as governor for Pakistan at the IMF, a post that comes with the position he has been appointed at the State Bank, without a conflict of interest coming up considering he will be an employee of the Fund and a key representative of a country borrowing from the Fund at the same time?

A number of names circulated for the position of FBR chairman, but no hint of confirmation emerged from the government till late on Saturday. Dr Ahmed Mujtaba Memon, a former officer of the customs department was in play but there was the matter of an FIR that was registered against him back in 2016 on corruption charges. The case was closed, but his re-entry into the FBR was compromised so he was accommodated in the finance division as an additional secretary instead. Any appointment of Mr Memon is likely to dredge up this history.

Monday will tell how well the uncertainty has gone down on the trade floor. The next auction of government treasury bills is scheduled for Wednesday, and at that time the expectations that debt markets have on the direction of interest rates will also become apparent.

Published in Dawn, May 5th, 2019