The resignation of the State Bank’s governor, Yaseen Anwar, announced by the finance ministry on Thursday once again bared cracks in the economic team of the government. The move has generated anxiety in the financial sector, and may add to the volatility in the currency market.

“The decision will impact the economy negatively as it has revealed the differences between the ministry and the central bank,” commented an expert who closely monitors the money market.

Mr Anwar was the third governor who resigned before completion of his tenure. Saleem Raza and Shahid Kardar had resigned before him pre-maturely.

It seems that the champions of free economy are not aware of the signals such moves emit for all who care to take interest in the country and its affairs. “The dream of attracting foreign investments is difficult to realise if the government’s interference squeezes space of governor to the extent that he prefers resignation to subordination,” the expert said.

“Why the government could not wait for the completion of Mr Anwar’s tenure and created environment where even a meek man like him preferred to leave?” Stakeholders in the financial sector are asking this question.
Nobody in the banking sector is ready to buy the reason forwarded. When the governor left for Singapore a few days back, the report of his resignation started circulating in the media. Some senior bankers told Dawn they were informed about the resignation by the finance minister.

Last week, after the announcement of the monetary policy in Karachi, Mr Anwar was visibly under stress when he faced the media. He defended the policy that he claimed would improve the country’s dwindling foreign exchange reserves.

“It was only I who knew that the reserves of the country will improve after January 2014 because the currency swap agreement with China helped to protect the reserves,” he said in that press conference. He stressed that it was he who initiated and negotiated the agreement of $1.5 billion for three years with China.

Sources in the financial sector said the Ministry of Finance held the governor responsible for dismal reserves. He is also said to have opposed the IMF deal.

However, the government’s massive borrowing from the State Bank was another reason as the SBP felt uneasy over the borrowing trend and the governor during the press conference after monetary policy pointed out that the government failed to meet the commitment to bring down the borrowing to zero level at the end of each quarter. The government has so far borrowed Rs745bn from the central bank during the current fiscal year, and has no chance to meet the zero limit at any point during this year.

The financial sector believes that the governor was also under pressure over the Youth Loan Scheme.

“Can a government use Rs100bn of a public bank’s money for a populist scheme?” said a senior banker, adding that the SBP was under pressure from private banks to resist the government’s move.

Bankers said the scheme has no match with the Benazir Income Support Programme as the money is allocated in the budget. In the case of youth scheme the government wants to use the bank’s money directly for a politically-driven scheme.

“There may be many reasons from interest rate to inflation and from borrowing to youth scheme, but the prime question is that how this resignation will hit the financial and business sector and what message has been sent abroad,” said an analyst.

“This is a bad omen that governors of an autonomous central bank are forced to resign,” said the senior banker.