State Bank Governor calls it a day

KARACHI - The resignation of Shahid H. Kardar as Governor State Bank of Pakistan could signal trouble ahead for monetary policy outlook and economic growth of the country, according to economic and financial experts. This development would have negative repercussions for the capital and financial markets, fueling inflationary pressures and price instability in times to come. The media reports while quoting official sources in the Ministry of Finance on Wednesday said Pakistans Central Bank Governor has resigned from his post and Yasin Anwar, Deputy Governor SBP will take charge as Acting Governor SBP soon. Kardar is the second Governor who resigned in just over a year. Shahid Kardar resignation depicted mixed reactions from the various economic and financial circles. Many experts said markets revived confidence and performed relatively better since Kardar took his office in 2010. During his tenure,the year-on-year CPI inflation came down from a peak of around 15.5 per cent in December 2010 to 13.2 per cent in May 2011. Moreover, from January to May, a sharp decline was witnessed in currency printing by the SBP. Terming SBP Governors resignation from his slot, though it is still unconfirmed by the Ministry of Finance, bad for countrys macroeconomic growth and stability, experts said the government has so far failed to create real economic governance in the country. Despite showing its commitment to pursue prudent macro-economic policies, the government is facing difficulties in containing the size of fiscal deficit. The impact of the widening fiscal deficit is clearly visible in sharply rising domestic debts. The present government has increased the burden of foreign debts to an alarming level of $58 billion in FY-11. 'The government is also facing difficulties in implementing fiscal reforms due to lack of multi-partisan consensus among stakeholders, said an expert. According to experts the implementation of fiscal reforms still poses political challenges. 'For instance, structural problems that require difficult policy decisions for fiscal consolidation (e.g. expanding the base of GST through the withdrawal of exemptions, tax on agri-income, and restructuring and privatisation of PSEs) are pending resolution and awaiting multi-partisan consensus. The media reports claimed that it was unclear exactly when Shahid Kardar, the Governor of the State Bank resigned, but his departure is likely to further shake confidence in Pakistans commitment to fiscal reforms urged by the IMF and other international lenders. Kardar is the third senior policy-maker to quit in Pakistan in less than a year and a half, following previous Governor Salim Razas resignation in June 2010 and former Finance Minister Shaukat Tarins resignation in February last year. SBP Governor normally serves three-year term but no reason was given for his resignation while it is still unclear whether Kardars resignation had been accepted by President Asif Ali Zardari. The SBP spokesman said he was unable to confirm the resignation. The IMF was unavailable for comment. Kardar joined as SBP Governor in September 2010, after the previous Governor Salim Raza stepped down for 'personal reasons in June 2010.