Yaseen Anwar appointed governor of central bank

Reuters/Karachi/Islamabad

Yaseen Anwar

Pakistan’s acting central bank governor, who approved what analysts say were highly risky interest rate cuts, was appointed as State Bank of Pakistan governor yesterday, a spokesman for President Asif Ali Zardari said. Yaseen Anwar assumed duties on an interim basis three months ago after the former governor of the State Bank of Pakistan resigned citing “differences of opinion on policy actions.” “On a summary moved by Ministry of Finance and on the advice of prime minister, President Asif Ali Zardari today approved the appointment of Yaseen Anwar as governor State Bank of Pakistan,” the president’s spokesman Farhatullah Babar said. Anwar’s appointment makes him the fourth central bank chief in Zardari’s government, reflecting the difficulties Pakistan has had in attracting and retaining officials in government service. Anwar also has aggressively — and unexpectedly — cut the key policy rate by 200 basis points to 12% since July, leaving analysts puzzled and concerned that the move, aimed at spurring growth, may end up widening the deficit and spurring inflation in the fragile economy. The rate cuts have also led to some analysts questioning the bank’s independence, specially since the main beneficiary of lower rates would be Zardari’s cash-strapped government. Debt-laden Pakistan is also under pressure from a depreciating rupee which makes it harder to repay foreign loans, the country’s main source of income to keep its economy afloat. In 2008, Pakistan and the International Monetary Fund agreed on a 3-year package loan for $11bn. But the programme was halted in 2010 because of slow implementation of fiscal reforms, and only $8bn had so far been disbursed. The programme ended on Sept. 30 and Pakistan opted out of asking for a new loan. Islamabad has to start repaying the loan in early 2012 and that’s when the pressure on foreign exchange reserves will increase.