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(Updates with revised growth forecast in 12th paragraph.)
Oct. 19 (Bloomberg) -- Yaseen Anwar, who cut interest rates in the past three months as the Pakistan central bank’s acting governor, was named its chief as the economy struggles with terrorism and falling investment.
“His appointment is confirmed,” Zafaryab Khan, a spokesman in Pakistan Prime Minister Syed Yousaf Raza Gilani’s office said by telephone from Islamabad today. Anwar, 60, will replace Shahid Kardar, who resigned in July citing policy differences with the government.
Anwar reversed Kardar’s monetary tightening, slashing the benchmark discount rate by 2 percentage points since the end of July to spur investment. The State Bank of Pakistan had scope to act and join emerging market counterparts from Russia to Brazil in lowering borrowing costs after Pakistan’s inflation eased.
“Anwar ensures continuity in policies aimed at spurring growth,” said Ahmed Raza Khan, Karachi-based head of research at IGI Finex Securities Ltd. “To what extent he can further ease the policy rate would depend on inflation pressures.”
The Pakistan rupee has declined 1.3 percent this year and dropped to a record low on Sept. 16, prompting the central bank last month to conduct what it called a “calibrated intervention” to stabilize the currency and curb the threat of higher import costs.
The Karachi Stock Exchange 100 Index has dropped 3 percent since the start of this year, while Pakistan’s 10-year government bond yields are trading at 12.2 percent, the highest level after Greece and Venezuela, according to data compiled by Bloomberg.
Consumer prices rose 10.46 percent in September from a year earlier, after climbing 12.43 percent in July, according to the Federal Bureau of Statistics.
Gilani’s government named Anwar, a deputy governor since March 2007, as the central bank’s acting chief after Kardar quit on July 12. The State Bank unexpectedly cut rates by half a percentage point in the July 30 policy decision, almost three weeks after Kardar resigned blaming state spending for fanning prices.
Anwar, who worked at Merrill Lynch & Co. and Bank of America Corp. in his 33-year career before joining the State Bank, cited the government’s commitment to “zero borrowings” from the central bank as one of the reasons for reducing rates in July. The federal government paid back 76 billion rupees ($877 million) to the central bank this fiscal year that started July 1 compared with borrowings of 200 billion rupees in the same period a year earlier, according to the central bank.
On Oct. 8, the central bank reduced the discount rate by a more-than-expected 1.5 percentage points to 12 percent.
The State Bank is scheduled to announce its next rate decision toward the end of November.
Pakistan’s economic growth rate may be 0.5 percentage point lower than the government target of 4.2 percent in the year ending June 30, a finance ministry official said at a background briefing for reporters in Islamabad today.
Policy makers are aiming to boost economic growth from 2.4 percent in the previous year, one of the lowest expansions in the past decade, as the country struggled to cope with floods and militant attacks.
Terror attacks in the South Asian nation have killed at least 35,000 people since 2006, according to government estimates. Floods in August forced more than one million people from their homes and damaged crops in parts of southern Pakistan still recovering from last year’s worst ever monsoon inundations that devastated the region.
Foreign direct investment in Pakistan fell 28.5 percent to $282.7 million in the first three months of the fiscal year that started July 1 from a year earlier. By contrast, India, from which Pakistan was partitioned in 1947 following independence from British rule, got $13.4 billion in the three months through June, a quarterly record.
--With assistance from Farhan Sharif in Karachi. Editors: Cherian Thomas, Naween A. Mangi
To contact the reporter on this story: Haris Anwar in Islamabad, Pakistan at email@example.com
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