IT is odd that the government has recruited former State Bank governor Reza Baqir as a consultant to work on building its Sovereign Wealth Fund. Baqir has little experience building organisations. Besides, his tenure at the State Bank has left a legion of unanswered questions.

Baqir entered the State Bank amid high inflation and an abrupt change of guard at the finance ministry, when Asad Umar was ousted unceremoniously to be replaced with Hafeez Shaikh. Pakistan signed an IMF programme within a fortnight of Shaikh’s arrival, something Umar had struggled with for almost seven months. Interest rates were already high in those days since Pakistan was still recovering from severe balance-of-payments stress as well as a period of high inflation fuelled by record-high printing of money. Direct government borrowing as a proportion of total broad money supply crossed 50 per cent in May 2019, having spiralled from early 2017.

The State Bank had already hiked interest rates all through the preceding year, but from May raised them by 250 basis points to 13.25pc where they stayed till Covid-19 hit. Baqir took a hit from all directions for this aggressive monetary policy. He had a hostile reception from the business community, and rumours swirled that at one event some attendees tried to physically accost him. His attempts to explain the high interest rates were not working, but he himself remained steadfast about the need for a........

© Dawn