Pakistan appoints IMF official as new central bank governor amid bailout talks

Monday, 6 May 2019 00:00 -     - {{hitsCtrl.values.hits}}

KARACHI, (Reuters): Pakistan on Saturday appointed International Monetary Fund (IMF) economist Reza Baqir as its new central bank governor, as the South Asian nation seeks to finalise bailout negotiations with the Fund to avert an economic crisis.  

Reza Baqir

The Government hopes an IMF bailout will help stabilise its ballooning budget and current account deficits at a time when inflation is high and economic growth is declining sharply. 

Baqir was appointed to a three-year term as the Governor of the State Bank of Pakistan, a day after his predecessor, Tariq Bajwa, was unexpectedly removed from his post along with the head of the tax collection body. 

Bajwa was one of the key figures negotiating the IMF bailout on Pakistan’s behalf after Finance Minister Asad Umar was asked to resign last month. 

“Notification for Reza Baqir has been issued,” Abid Qamar, a spokesman for the Central Bank, told Reuters on Saturday night. 

Pakistani by origin, Baqir has worked for the IMF in Egypt and Romania, where he was the IMF mission chief. He graduated from Harvard University and later obtained a PhD in economics at the University of California, Berkeley, according to the English language Dawn newspaper. 

Separately, local media reported on Saturday that Ahmed Mujtaba Memon has been appointed as the new chairman of the Federal Bureau of Revenue to replace Jahanzeb Khan, who was sacked a day earlier. 

Prime Minister Imran Khan, who assumed power in August, inherited a wobbly economy but has faced growing criticism for failing to steady the ship. He has also been frustrated by low tax-collection rates. 

Last month he carried out a sweeping cabinet reshuffle, including appointing experienced technocrat Abdul Hafeez Shaikh as his new de facto finance chief. 

One of the key sticking points during the IMF bailout discussions has been how to manage the local rupee currency, whose exchange rate the Central Bank underpins in a de facto managed float system. But the country has been burning through its foreign currency reserves to defend the rupee. 

Bajwa, appointed Governor in 2017 under the previous government, was seen as close to Ishaq Dar, the former finance minister who picked him and championed a strong rupee policy that many analysts blame for Pakistan’s current economic woes. 

The IMF is pushing Pakistan to embrace a more flexible rupee policy to end repeated boom-and-bust cycles that have led to 12 IMF bailouts since the late 1980s. Many analysts argue that the local currency is overvalued. 

The Central Bank in March cut its economic growth estimates, forecasting the economy would expand 3.5 to 4% for the year to the end of June, well short of a Government target of 6.2%. The IMF paints a gloomier picture, predicting growth of 2.9% in 2019 and 2.8% next year. 

Pakistan’s consumer price inflation in March rose to its highest since November 2013, hitting 9.41% year-on-year, before easing to 8.82% in April.