SBP's challenge.

IN normal circumstances, the government's decision to not give Dr Reza Baqir another term as central bank governor would not have provoked much debate. But the present political and economic situation in Pakistan is hardly normal. The change at the top comes at a time when the country is grappling with a terrible economic crisis amid an uncertain political situation and is trying for the restoration of IMF funding to reduce pressure on the deteriorating balance of payments position. On top of that, the elevation of deputy governor Murtaza Syed as acting governor, instead of the announcement of Dr Baqir's permanent successor, is also raising questions about the political authorities' intentions to 'control' the State Bank from Q Block, undermining its recently granted independence. It is also unclear as to how long the government plans to carry on with this 'interim' arrangement. There are legitimate concerns that the PML-N wants this opportunity to informally clip the bank's powers. Senior PML-N leader and former finance minister Ishaq Dar's recent criticism of the fall of the rupee and increased yields on government debt are strengthening this impression, even if the government has no intentions of influencing the bank. The political optics can be unsettling for the ruling coalition, which is already facing pressure from the PTI for early elections. Besides, it will create confusion at the central bank and affect its decision-making at a time when foreign exchange reserves are depleting on the back of a growing trade deficit that has expanded to over...