A PENCHANT for masochism should be included in the job description of every governor State Bank of Pakistan. Too many recent incumbents have seen their tenure end in a swift crucifixion.
Since 1948, the State Bank of Pakistan has seen off 19 governors. The tenure of each governor (a statutory minimum of three years) has varied, depending upon the whims of Islamabad. Gen Ziaul Haq exiled A.G.N. Kazi (Mr Z.A. Bhutto’s financial confidante) to that outpost for almost eight years; Shakirullah Durrani (Gen Yahya Khan’s acolyte) lasted only 174 days until he was removed by Bhutto. One of two fled, unable to bear the heat in the kitchen.
The 20th governor, Dr Reza Baqir, took over recently on May 5. He moved to his home country after a two-year stint as a senior resident representative in Egypt. He has made a daring leap, from the cauldron of Cairo into the inferno of Islamabad.
The relationship between the State Bank and its clients (the federal and provincial governments) rests on the pivot of autonomy. The State Bank, like every responsible banker, is often compelled to give advice that is unpalatable, which of course its clients ignore.
Since 1948, the State Bank of Pakistan has seen off 19 governors.
The State Bank of Pakistan Act of 1956 tried to ensure its autonomy by protecting its queen bee — the chief executive. Article 3 of the Act provides that “the Governor shall be appointed by the President for a term of three years, and on such salary and terms and conditions of service as the President may determine, except that neither the salary of the Governor nor his other terms and conditions of service shall be varied to his disadvantage after his appointment.” Despite this, no governor shown the door has ever knocked on the doors of the judiciary for restitution.
Incoming governors are expected to bring professional knowledge, expertise and personal credibility. Why else should the public put its faith in his or her signature on our bank notes? Unseen, though, are their personal idiosyncrasies. One early governor, for example, spent his leisure hours narrating endless reminiscences about his friendship with the Quaid. Another preferred not to recall being driven past his former office, handcuffed in a police van, to and from the courts.
One incumbent — who also happened to be from the IMF — returned from a meeting with the then First Husband shaking and emotionally shattered. (He kept repeating: “They threatened my family!”) And a more recent one, who after being appointed to the post, was invited to meet his boss. The president explained in staccato sentences (to avoid miscommunication) that the State Bank was the banker to the government, that he as president of the country was the government, therefore the State Bank was his bank. Understood? That particular governor lasted 309 days.
The peremptory manner in which the new economic troika has been inducted is a forceful indicator of the prime minister’s style of attacking our economic problems on a war footing. The speed with which the IMF package was approved makes one look for the smoking gun in what ought not to have been a hasty, shotgun marriage. After all, it was we who approached the IMF, in our own time and on our own terms. The IMF has agreed to our supplication, in record time, but on their terms.
Dr Baqir may find a list in the drawer of his State Bank office desk, left by his predecessor, listing three major priorities. The first is the need to promote a habit of savings among a people who regard all inflows (both capital and revenue) as streams of disposable income. The second is to improve the tax-to-GDP ratio in a country where tax avoidance has become part of our national DNA. The third is to help narrow the trade gap between our imports of $64 billion and our exports of $24bn.
Pakistan is a consumer-holic. We have become addicted to living beyond our country’s means. What is not known to most Pakistanis is that our agri-nation — one of the top five milk producers in the world — still airlifts fresh milk from New Zealand. This is not just individual taste gone rampant; it is idiocy on a national scale.
Had Pakistan been South Sudan or Senegal, its bankruptcy would have been of less significance to our creditors. Daily, we reassure ourselves that we are a mature, responsible nuclear power. We can disguise the location of our nuclear warheads. We cannot disguise the reality of our financial insolvency.
The changes in the financial team have released a plethora of images. One image is particularly poignant. It shows the head boy at Aitchison in 1988 (Reza Baqir) presenting a cheque for Rs11 lakhs to the then chief minister Punjab (Nawaz Sharif). Neither of them may remember the event. Sic transit gloria, et pecunia.
The writer is an author.
Published in Dawn, May 16th, 2019