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regular-article-logo Saturday, 13 April 2024

Race for new Pakistan finance minister heats up ahead of crucial International Monetary Fund negotiations

The struggling $350 billion economy has a narrow path to recovery and the current IMF agreement expires on April 11, with critical external financing avenues linked to securing another extended programme

Reuters Islamabad Published 01.03.24, 03:56 PM
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Pakistan's newly-formed ruling alliance is yet to finalise its finance minister, the person who has to lead an immediate effort to negotiate a new International Monetary Fund bailout, sources familiar with the discussions said.

The struggling $350 billion economy has a narrow path to recovery and the current IMF agreement expires on April 11, with critical external financing avenues linked to securing another extended programme.

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Former four-time finance minister Ishaq Dar remains the top contender, according to two sources in his Pakistan Muslim League-Nawaz (PML-N) party, which is leading the coalition.

PML-N's Shehbaz Sharif has been nominated by the alliance to be prime minister in an election scheduled for March 3. He will announce his cabinet, including the finance minister, shortly after being elected.

But Dar is not the only candidate being considered, the sources said. Despite being a relative of, and close aide to, PML-N chief Nawaz Sharif, many political allies have criticised Dar's handling of the economy in the last coalition set up.

He, however, has defended his actions, saying he had to take tough measures to avert a sovereign default by securing the IMF programme, which former Prime Minister Imran Khan had scuttled days before leaving his office, a charge Khan denies.

Pakistan struggled for over four months to lock in the stand-by arrangement last summer when Dar was finance minister, and it took the intervention of his prime minister, Shehbaz Sharif, to secure a last-ditch deal.

Dar also regularly criticised the IMF on public platforms in the middle of negotiations, and has long favoured market interventions to prop up the Pakistani rupee - something the IMF has warned against.

If Dar doesn't get the portfolio, his party might consider creating a position of deputy prime minister for him, one of the sources in the PML-N said.

Also being considered are caretaker Finance Minister Shamshad Akhtar, a former central bank governor, who is overseeing key policy measures under the current IMF programme, both sources said.

Akhtar has been a key part of the caretaker set up that has been praised by the IMF for "decisive policy efforts" to maintain stability.

Another name being considered is Muhammad Aurangzeb, president and chief executive officer of the country's largest bank, Habib Bank Limited, the sources said.

Aurangzeb had also served as the CEO of JP Morgan's Global Corporate Bank based in Asia.

Akhtar did not respond to a Reuters request for a comment and Aurangzeb's HBL said it would not comment on "rumours and speculations."

A PML-N spokesperson did not respond to a request for comment.

Dar himself told reporters before the parliament's inaugural session on Thursday that there was no decision yet when asked if he would be the choice for finance minister again.

PML-N senior leader Irfan Siddiqui told the local newspaper The News that Dar will "most probably" be picked for the post.

Aside from negotiating a new and extended IMF programme, the new finance minister will have about three months to prepare a federal budget that will need to strike a difficult balance between tough reforms and rejuvenating a struggling economy.

The PML-N, leading a minority government, will be relying on the support of different parties to pass critical legislation, with alliance partner Pakistan Peoples Party saying it would support the government on an issue-to-issue basis.

Efforts to assuage growing public anger at record inflation hovering around 30% will also be challenging with limited fiscal space.

"Pakistan needs someone who has broad and in-depth international experience to introduce the kind of reforms that have helped many other countries to come out of economic crises," said Yousuf Nazar, a London-based economist and former Citigroup banker. He however declined to say who was best suited.

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