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New SBP chief headed IMF mission in Egypt

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May 5, 2019

ISLAMABAD: With the appointment of Dr Reza Baqir as the next State Bank of Pakistan (SBP) Governor, the chances for replication of Egyptian model would be brightened under the IMF-sponsored programme on the name of fixing Islamabad’s ailing economy.

It is not yet known whether Reza Baqir will say goodbye to the IMF by getting retirement or not because in case of only getting leave, the question of conflict of interest will arise.

The circles close to the government, however, say everything regarding the appointment would be according to country’s laws. They say country needed an uncontroversial man of outstanding capability and credentials to head the central bank, and Dr Reza is the man.

There are some interesting correlations in this whole comparison. Dr Reza Baqir was currently serving as IMF’s Resident Chief in Egypt. Under the three-year IMF programme of Extended Fund Facility (EFF) from 2016 to September 2018 in Egypt, the poverty had gone up from 35 percent to 55 percent.

The three-year EFF programme provided to Egypt in November 16 witnessed that the exchange rate under EGP/USD nearly doubled overnight.

Consequently, the headline inflation surged to 33 percent in Jul-17 prompting the Egyptian central bank to raise the policy rate to 19.25 percent. Such massive devaluation in Egypt did not help improve its trade deficit as exports slightly increased and went up from $5.26 billion in Sept 2016 to $6.78 in September 2018. Egypt was rescued by its tourism industry as it attracted a lot of tourists because of its historic and religious sites located in the country.

The sources said that former finance minister of Egypt had told Asad Umar, former finance minister of Pakistan, that Islamabad must think 10 times before adopting Egyptian model of IMF programme because it had doubled the poverty, surged inflationary pressures and did not help increase exports despite devaluation Egyptian currency of almost 125 percent against US dollar.

When the inflation started receding in Egypt under the IMF programme through targeted measures, the month of July reached when prices of utilities especially gas were hiked due to withdrawal of subsidies under the IMF programme.

The former Egyptian officials were of the view that Jordan also entered into the IMF programme and landed into political upheaval after which major changes were brought into the government.

Former economic adviser to the Finance Ministry and renowned economist Dr Ashfaque Hassan Khan also termed Egyptian model of the IMF a recipe for disaster for Pakistan’s economy and stated that the poverty and unemployment was bound to go up and growth would be choked.

The government quarters, however, have a different position. They say an IMF programme is always finalised with consent of the country concerned. The success of the programme depends upon the implementation of lender’s condition agreed to by the country receiving the programme. If the country concerned does not implement mutually agreed measures, the lender cannot be held responsible if economic crisis persists, they added.

Dr Reza Baqir is currently serving as IMF’s Senior Resident Representative to Egypt. His key responsibilities include helping the authorities implement their economic reforms programme supported by a $12 billion loan from the IMF, maintaining and strengthening good relations between Egypt and the IMF, providing policy advice, and coordinating technical assistance, amongst other areas. Egypt is Dr Reza Baqir’s second overseas country assignment. During 2005-2008, he was posted in Manila as the IMF’s Resident Representative to the Philippines where he was awarded the Order of Sikatuna, an order of diplomatic merit, by the president of the Philippines.

Dr Reza Baqir has served at the IMF for 18 and a half years. His previous experience in the headquarters includes Mission Chief for Bulgaria and Romania (2016-17), Chief of the IMF’s Debt Policy Division (2012-16), Deputy Chief of the IMF’s Emerging Markets Division (2009-11) and other assignments. His other country experience includes Cyprus, Ghana, Greece, Jamaica, Portugal, Thailand and Ukraine amongst others.

In addition to country work, Reza Baqir has led analytical and policy work in the IMF on managing capital flows, public debt sustainability, sovereign debt restructuring and vulnerability analysis for emerging markets. Prior to his experience in the IMF, Dr Baqir has two years of experience at the World Bank.

Reza Baqir’s research has been published in several leading journals of the economics profession, including the Journal of Political Economy and the Quarterly Journal of Economics. Dr Baqir was a Visiting Scholar at the Massachusetts Institute of Technology during 1999-2000.

Reza Baqir holds a PhD in Economics from the University of California at Berkeley and an AB (Magna cum Laude) in Economics from Harvard University.

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