KARACHI/ISLAMABAD: Acting State Bank of Pakistan (SBP) governor, who approved what analysts say were highly risky interest rate cuts, was appointed as State Bank of Pakistan Governor on Wednesday, official sources said.
“Yes, Mr. Yaseen Anwar has been appointed as governor of the State Bank,” a senior government official told Reuters.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.””Yaseen Anwar has been appointed as SBP governor,” another official source confirmed to Reuters.
Anwar’s appointment makes him the fourth SBP 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 percent 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 $11 billion. But the program was halted in 2010 because of slow implementation of fiscal reforms, and only $8 billion had so far been disbursed.The program 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. – Brecorder