SHE was the shortest giant I ever met. Yet she commanded stature and could dominate a room full of people simply by being in it. It was the quiet authority she exuded that was her signature, the kind that seeks no validation from anyone. She steered Pakistan’s financial system through one of its most critical tests ever: the Great Financial Crisis of 2008, as governor of the State Bank at the time. And in doing so, she developed the template that was used by her successors more than a decade later.

The economy had been drifting towards crisis since 2006, when she came into the position of governor. She had already made history as the first woman governor of the State Bank, but little did she know that she would be called upon to make history one more time in dealing with the crisis coming her way. Pakistan’s foreign exchange rese­r­­ves were depleting fast, at an accelerating clip, and inflation was rising. In two years, the inflationary fire reached historic levels, and the rese­rve depletion brought the country’s financial system to the brink of a full-fledged run on the banks.

The financial sector had changed by the time this crisis arrived. In 1997, for example, total financial sector assets were around 95 per cent of GDP. By 2007, they had risen to 125pc. Equally important, most of this lay in private hands. And on the margins of the big banks and capital markets, a slew of smaller players operated — insurance companies, non-bank financial institutions, smaller banks that had escaped the merger and acquisition drive of the 2000s, listed private bonds, and so on. Financial........

© Dawn