THE government appointed Ashraf Mahmood Wathra as the governor of State Bank of Pakistan (SBP) for a three-year term on Monday.

Prior to the announcement, Finance Minister Ishaq Dar sought approval of the prime minister and the president. The SBP Act 1956 stipulates that the federal government must have to appoint SBP governor within a period not exceeding three months from the time the office falls vacant. That period was to expire on April 30.

Yet the urgency of Dar to put in place the head of central bank three days earlier shows that the minister was anxious to include a permanent governor SBP in his team for talks with IMF at the third quarterly review of $6.78 billion bailout package under the Extended Fund Facility (EFF), now underway in Dubai.

Although two other names were in circulation, the government preferred Wathra to fill the post of governor. Following the resignation of Yaseen Anwar as the head of country’s central bank ‘for personal reasons’, on Feb 1, Dar had appointed Wathra as the ‘acting’ governor till further orders.

Incidentally, the turnover of SBP governors has been rapid in recent years. The last to complete a full three year term was Dr Shamshad Akhter who left on Jan 1, 2009. In the five years that have followed, the SBP has seen three governors in quick succession: Salim Raza, Shahid Kardar and Yasin Anwar; the shortest stint was of Kardar who held on to the slot for just under a year.

Wathra’s profile indicates that he has been in commercial and investment banking for over 35 years. His last assignment before stepping into the SBP was Senior Executive Vice President and Group Chief, Credit Management Group at NBP. The incumbent has 25 years’ experience in banking sector with expertise in credit, corporate, investment and branch banking.

Questions are still raised in the banking and financial circles if Ashraf Mahmood Wathra is the best choice to head the country’s central bank? Views differ.

R.M.Alam, a senior banker thought that the incumbent was basically a corporate banker, while the country needed a hard-boiled economist to manage and tackle the issues faced by the SBP.

Under the law, the governor and the board of SBP once appointed cannot be removed before the expiry of their tenure except for ‘misconduct proven by the government’. It is understandable then that the three governors prior to Wathra resigned citing ‘personal reasons’, while there was strong suspicion that they did not see eye to eye with the Ministry of Finance and FM Dar on “ policy matters”.

Several bankers and economists believe that unlike his recent predecessors, Wathra may be able to hold on to the post for a full term. Appointed as the ‘deputy governor’ SBP by the then Prime Minister Raja Pervez Ashraf of the Pakistan People’s Party on March 5, 2013 (on the recommendation of governor Mr Anwar), Wathra survived the change of government.

Dar promoted him as the ‘acting’ governor. On most issues, he was generally seen to be on the same page with government.

Salim Raza, the former governor of SBP on a searching query played down the issue saying “let bygones be bygones”. When pressed further he said that the question of who should prevail in the affairs of SBP — the Ministry of Finance or the governor — should not arise.

Both the government and central bank have country’s interest on top of their minds. So there was no reason why the SBP and ministry of finance could not sit together and work out an agreeable solution to every issue on which they may have difference of opinion. On a general query about the fundamental qualifications of the SBP governor, Salim Raza said that he needs to have a strong forward looking approach. He reminded that the global sub-prime crisis of 2007 was triggered by banks, which underscored the need for vibrant central banks.

He asserted that the SBP governor should have both the fiscal and banking expertise as well as the economic expertise. Regarding the major challenge ahead, the former governor stated that the SBP and Ministry of Finance should in a consultative process work out a solution to manage government borrowing so as to reduce the troublesome debt servicing.

Economists say that at present, there is a conflict of interest between sound banking practices and government’s financial needs. The IMF requires separation of monetary from fiscal policy. If the SBP gets the autonomy it is promised, central bank would be able to regulate the monetary and credit system of Pakistan. It would be able to alter the interest rates to curtail inflation, as the price stability would be the primary objective of the SBP. At the moment, the government has its hand in dictating the interest rate policy keeping the growth in mind. The government had introduced “The State Bank of Pakistan (Amendment) Act, 2014” in the National Assembly on April 1. But the IMF was believed to have reservations on whether it would provide full autonomy to the central bank in line with international best practices. Reports indicated that the IMF might bring up the issue at the ongoing talks in Dubai.