KARACHI, Sept 4: The Governor of the State Bank of Pakistan, Dr Ishrat Hussain has suggested to the government to appoint central bank chief for one term of five years period with no provision of renewal.

“By keeping the provision of renewal, you compromise the independence of the State Bank as the Governor will look towards the politicians in power when his term approaches expiry,” the governor responded to a question in a seminar on ‘Role of State Bank’ organized by the Management Association of Pakistan (MAP) on Wednesday. V. A. Jaffery, a former governor of the State Bank was the other expected speaker in the seminar. But he did not turn up.

“This proposal is not person-specific and should not be interpreted as such,” Dr Ishrat retorted when he was approached by the newsmen at the end of his speech to explain whether his proposal of one term governor means that he would not seek renewal on expiry of his term next December. Under the present arrangement the term of the State Bank Governor is of three years which can be renewed. Dr Ishrat Hussain’s term is expiring next December.

Earlier, in his keynote address, the Governor gave all credits to the government of Nawaz Sharif for initiating the process of independence of the central bank in 1997. “There has not been any political loaning since 1997,” he disclosed.

He informed his audience that the State Bank is now an independent institution and the government cannot remove him till the expiry of his term.

The present government, he said, is very supportive of the central bank, and that he is in touch with the finance ministry to put across central bank’s views on many issues.

All said and done, he said, eventually the person matters if he can assert his authority as Governor. For example, he said, if there is any loaning by any bank on political influence the State Bank will definitely take action.

Dr Ishrat spoke at length on the restructuring and re- organization of the State Bank since the time he took over in December 1999. The most striking feature of the reforms,he pointed out, is to hire the best qualified people for the State Bank from outside at the higher, and middle entry level. “Even the foreigners are being appointed at places where Pakistanis are not available,” he said.

The governor ridiculed the media for looking with suspicion the foreigners engaged in various capacities. “What’s the harm in hiring a foreigner if we don’t have person of same qualification here,” he argued stating that by engaging such qualified persons “we enable young Pakistanis to work with the foreigners and get themselves trained in that particular discipline.”

He spoke of the heavy investment made in human resource development, massive technological investment taken up in last three years, steps taken to make off and on site inspection of banks more quick and responsive, and the organisational and structural changes made in the central bank. The whole system and procedures are also being changed to make foreign exchange regime management more effective.

The governor said that the only remedy to get rid of non-performing assets portfolio is the privatization of banks. He said that 80 per cent of bad assets are confined to seven institutions and government is determined to privatize six of them.

Only National Bank of Pakistan will be retained in public sector, but its 20 per cent shares will be offered to public so that there is a private sector monitoring in the board of directors.

He said the Agricultural Development Bank of Pakistan is being restructured and corporatized.

Answering a question he dispelled the impression that commercial banks are staying away from agricultural credits. The commercial banks he said have offered 24 per cent credits in the agricultural sector as the system has been made attractive.