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Thursday, July 18, 2024

Reza Baqir’s stint as SBP governor comes to an end: Looking back at his successes

The Bank introduced packages and many new facilities which promoted investments, prevented layoffs, enhanced the capacity of the health sector, and facilitated borrowing.

As the Federal Minister for Finance, Miftah Ismail, announced the government’s decision against granting an extension to the governor state bank, the country has top financial analysts vying for the position of which Dr. Murtaza Syed, the senior-most deputy governor, is the front runner. Reza Baqir is set to complete his three years as governor today, and as he leaves the office, he encourages others “to consider public service.” The International Monetary Fund economist was appointed as the governor of the state bank of Pakistan in 2019 for a period of three years and replaced Tariq Bajwa.

Under his leadership, the Central Bank introduced several initiatives. Firstly, just as Baqir joined the rank of head of the country’s Central Bank, the Corona outbreak took over the world. As a policy response, the Bank introduced packages and many new facilities which promoted investments, prevented layoffs, enhanced the capacity of the health sector, and facilitated borrowing. The Bank supported this by launching several schemes and packages such as the SBP Rozgar Scheme, TERF (Temporary economic refinance facility), Loan Extension and Restructuring Package, and RFCC (Refinance facility to counter Covid). In the backdrop of the Corona pandemic and to promote digital payments, SBP waived all charges for customers using online fund transfer services. Further, to enable easy on-boarding of customers to use online banking channels, SBP waived the requirement of biometric verification to activate internet and mobile banking.

Read More: New IMF program for Pakistan: Analyzing the rerun of balance of payment challenges

Promoting trade: 

The Bank also enabled exporters and importers to get easy access to financing facilities. In the bid, the Central Bank extended the settlement of FE loans to up to 180 days. The SBP also scaled the capital provided to the banks under Exports Finance Scheme (EFS) by Rs 100 billion. The assistance was aimed at supporting the setting up of industrial units in the country. In addition, the Bank allocated Rs 90 billion under the Long Term Financing Facility and reduced the markup rate to five percent across all sectors.

Digital inclusion:

Under his governance, the state bank of Pakistan launched RAAST – an end-to-end digital payments system. The government introduced the RAAST system of payment because of the prevalent lack of trust and awareness of digital payment methods, high cost of digital transactions, lack of security, and a poor user interface (UI) of the local applications, which made transactions difficult. Furthermore, in collaboration with various banks in the country, the SBP also authorized the introduction of Roshan Digital Accounts, which for the first time made it possible for non-resident Pakistanis to remotely open an account in Pakistan. Since its launch, the RDA has attracted deposits of $3.9 billion while at the same time registering 388,494 accounts from 175 countries. The Central Bank also introduced a policy framework that for the first time promoted financial “inclusion of and innovation.” Under the framework, SBP grants two types of licenses; Digital Retail Banks (DRBs) and Digital Full Bank (DFB). The former (DRBs) primarily focus on retail customers, and the latter (DFB) focuses on businesses and corporate entities.

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Reducing gender gap:

The state bank also underscored the importance of the financial inclusion of women in the field. As a response, the Central Bank developed a Banking on Equality Policy which primarily focuses on reducing the gender gap by promoting the inclusion of women in the financial sector. The policy aims to increase women’s ratio in the financial sector to 20 percent, place women champions at 75 percent of all bank touchpoints, increase the ratio of women, branchless banking agents to 10 percent, increase the outreach of women-centric products & services, and remove implicit gender biases from the financial sector.

Read More: IMF bailout extended by one year, loans increased by $2 bn

House Financing:

Lastly, under Reza Baqir’s governance, the state bank also initiated the MeraPakistanMeraGhar scheme to promote affordable housing in the country. Under the scheme, people from all economic strata are getting loans.

The latest figures released by the state bank of Pakistan show that till April 11, banks received applications of Rs. 409 billion under the scheme of which Rs.180 billion have been approved & Rs. 66 billion disbursed. As a result of this scheme, the construction sector also boomed, which saw a significant increase in construction activity.

It is rumored that there was a difference of opinion over whether the governor should be granted an extension. PM Sharif is believed to have gone against the advice of the country’s finance minister when he ordered to relieve the governor of his duties. The change of leadership comes at a time when Pakistan is in talks with the IMF and wants to secure a two billion dollar increase on the EFF. The outgoing governor, talking about his stint as the head, said that he was “particularly proud” of the initiatives undertaken during his time as the head of the institution and thanked all SBP colleagues “whose hard work made these initiatives possible.”