SHE was the shortest giant I ever met. Yet she commanded stature and could dominate a room full of people simply by being in it. It was the quiet authority she exuded that was her signature, the kind that seeks no validation from anyone. She steered Pakistan’s financial system through one of its most critical tests ever: the Great Financial Crisis of 2008, as governor of the State Bank at the time. And in doing so, she developed the template that was used by her successors more than a decade later. The economy had been drifting towards crisis since 2006, when she came into the position of governor. She had already made history as the first woman governor of the State Bank, but little did she know that she would be called upon to make history one more time in dealing with the crisis coming her way. Pakistan’s foreign exchange rese­r­­ves were depleting fast, at an accelerating clip, and inflation was rising. In two years, the inflationary fire reached historic levels, and the rese­rve depletion brought the country’s financial system to the brink of a full-fledged run on the banks. The financial sector had changed by the time this crisis arrived. In 1997, for example, total financial sector assets were around 95 per cent of GDP. By 2007, they had risen to 125pc. Equally important, most of this lay in private hands. And on the margins of the big banks and capital markets, a slew of smaller players operated — insurance companies, non-bank financial institutions, smaller banks that had escaped the merger and acquisition drive of the 2000s, listed private bonds, and so on. Financial risk had taken complex forms with these changes, and improving banking supervision and surveillance had become critical tasks. Akhtar focused hard on the sources of risk and their propagation channels, and worked to develop a surveillance regime as well as upgrade regulatory requirements to shore up the resilience of banks against possible crises. To do this, she worked to identify risks to financial institutions, markets as well as infrastructure. The system faced wide-ranging risks along multiple fronts as it evolved out of public sector hands into private ownership, and strengthening banks’ capital adequacy in addition to the regulators’ visibility of systemic risk was becoming increasingly critical. Had it not been for the deft balancing act she performed in those months, Pakistan’s inflation would have peaked far higher than it did. Her efforts bore fruit in the year 2008, when the Great Financial Crisis engulfing the world finally landed in earnest on Pakistan’s shores. The financial system was hit by a wave of withdrawals so severe that it created a crisis that the country had never seen before: a full-fledged banking sector collapse. A number of developments began to unfold simultaneously. Widespread dollarisation began in 2007 as reserves fell and the current account deficit swelled. One devaluation in November 2007 triggered a flight into dollars, which accelerated all through 2008. Second, non-performing loans of the banking system began to skyrocket in the early months of 2008, reaching levels equal to what they were in the pre-privatisation days. Third, by the summer of 2008, banks stopped bidding for government debt paper in anticipation of an interest rate hike, forcing the State Bank to print more money to finance runaway government spending on subsidies that the Musharraf regime was unwilling to withdraw in the face of mounting challenges to the general’s rule. Fourth, a global price spiral in oil and wheat was placing unprecedented strain on the country’s external account, sending the trade deficit skyrocketing and draining foreign reserves further still. A near-perfect storm was brewing until then, but it was completely overshadowed by the stormy political developments of the day. The economy did not stand a chance in competing for the headlines in days when the Lal Masjid crisis and the lawyers’ movement were roaring ahead. By the summer of 2008, the perfect storm began to take shape. Dollarisation gave way to dollar flight. Banks were hit by panic-driven withdrawals of rupee liquidity so severe that the weaker among them began to shake under the strain. The government’s fiscal crisis worsened and printing of rupees accelerated. The crisis landed in the first week of October, when Eid-related cash withdrawals from the banking system combined with panic withdrawals sent at least four banks into a liquidity crisis. The real story of those days needs to be told properly. Four owners of small banks showed up in the office of Governor Akhtar to inform her that their banks were hit by withdrawals they could no longer honour. The interbank lending window had shut down. In short, a run on the banks had begun. Akhtar knew that the banking system needed strengthening all along. It was the steps that she had taken earlier in her tenure, building on the work of her predecessor Ishrat Husain, that helped the banks weather the intense liquidity crisis they faced in 2008. But vulnerability remained when a few smaller banks were unable to sustain themselves in the face of the severe strains they were facing. And this is precisely how banking systems face total collapse, when the weakest among them fails, panic spreads, and soon everyone starts seeing panic-driven withdrawals. Akhtar managed this situation, trying to prevent a fully-fledged financial meltdown while at the same time trying to prevent, as far as was possible, the full impact of the crisis hitting the common citizenry in the form of inflation. Had it not been for the deft balancing act she performed in those months, Pakistan’s inflation would have peaked far higher than it did, at 25pc. This was the first test of Pakistan’s new, post-privatisation financial system. And Akhtar was the captain of the fleet who navigated them all through the choppiest waters they had ever traversed. She was a steady hand on the tiller, a firm captain of her will and a resolute central banker who put duty above ambition. May she rest in eternal peace. The writer is a business and economy journalist. khurram.husain@gmail.com X: @khurramhusain Published in Dawn, January 1st, 2026