Pakistan central bank governor resigns

It was unclear exactly when Shahid Kardar, the governor of the State Bank of Pakistan, resigned, but his departure is likely to further shake confidence in Pakistan’s 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 central bank governor Salim Raza’s resignation in June 2010 and former finance minister Shaukat Tarin’s resignation in February last year.

“I can confirm that he has submitted his resignation,” a Finance Ministry official said on condition of anonymity.

Central bank governors normally serve three-year terms. There was no reason given for his resignation. It was not clear whether Kardar’s resignation had been accepted by President Asif Ali Zardari.

IMF and Pakistan officials, including the State Bank of Pakistan governor, are due to meet later this month, although no date has been announced. It is unknown how Kardar’s departure will affect the talks but a former economic adviser said it would hit financial markets.

“The IMF deals with institutions and not individuals so it’s likely the acting governor will attend the IMF meetings,” said Sakib Sherani, a former economic adviser to the finance ministry.

“What’s critical for the markets is who his successor is and why he resigned.”

The central bank chief spokesman said he was unable to confirm the resignation. The IMF was unavailable for comment.

At a news conference in Quetta, in response to a question about reports of Kardar’s resignation, Prime Minister Yusuf Raza Gilani said: “Not to my knowledge.”

The News, a leading Pakistani daily newspaper, quoting “informed sources”, said Kardar had developed “differences with the government on key policy issues”.

Repeated efforts by Reuters to contact Kardar were unsuccessful.

The federal government has been reluctant to implement fiscal reforms demanded by the International Monetary Fund and supported by the central bank.

The State Bank of Pakistan has urged a broadening of the tax base by improving documentation of the economic system and gradual elimination of untargeted subsidies. These are politically unpopular for the federal government

It has also called for better debt management by the government to contain the fiscal deficit.

At the same time, the government is struggling to get back on track an $11 billion IMF bail-out programme. The release of a sixth tranche has been delayed since August 2010 because of the government’s poor implementation of fiscal reforms.

Kardar joined as the central bank governor in September 2010, after the previous governor Salim Raza stepped down for “personal reasons” in June 2010.

A senior government official at the time, however, said the government had been trying to curtail the central bank’s independence, prompting Raza’s departure.

Pakistan’s main stock index seemed unfazed by the reports and provisionally closed 0.60 percent higher, while the rupee ended flat at 85.84/88 to the dollar, unchanged from the previous day’s close.