KARACHI: Sweeping changes to Pakistan’s cabinet won’t effect annual spending plans or ongoing negotiations with the International Monetary Fund for a bailout package, senior officials said on Friday, a day after Prime Minister Imran Khan announced 10 new ministerial appointments in a shakeup that included the departure of Finance Minister Asad Umar.
On Thursday, Khan appointed Dr. Abdul Hafeez Shaikh, who has served as finance minister from 2010-2013 under the opposition Pakistan Peoples Party when it was in power, as “Adviser on Finance.”
Shaikh, a graduate of Boston University, has taught at Harvard, spent many years working for the World Bank and was privatization minister during the government of former military ruler General Pervez Musharraf.
“There would be no impact on the talks with the IMF due to the changes made by the prime minister,” Yousaf Baig Mirza, Special Assistant to the Prime Minister on Media Affairs, told Arab News on Friday. “The discussions with the IMF have already been done.”
Dr. Abid Qaiyum Suleri, a member of the government’s Economic Advisory Council, agreed that the cabinet reshuffle would not hamper the IMF bailout package.
“I don’t think that dialogue with the IMF would be impacted because the governor of the central bank and the secretary finance usually deal with the IMF and the finance minister meets with the mission head to share the contours of the policy line and the vision of the government,” Suleri said.
Former finance minister Dr. Salman Shah disagreed and said “the new minister would come up with different priorities which would have an impact on both the budget and IMF talks.”
Pakistan is close to signing its 13th IMF bailout program since the late 1980s to stave off a balance of payments crisis. The mission’s team is due in Islamabad by the end of April to finalize the program after spring discussions held in Washington this month. Pakistan is expected to secure a $6-$8 billion deal.
Many believe that Shaikh, who has served at the World Bank in a range of Asian, African and Middle Eastern nations, would be in his element in dealing with the IMF team.
“Hafeez Shaikh has a comfort level with the IMF and the World Bank,” said Khurram Hussain, the business editor of Dawn newspaper. “It now depends on him how quickly he is able to sign a deal with the Fund. Pakistan would have to sign the IMF program before the upcoming budget.”
The cabinet reshuffle has also raised questions of what kind of effect the changes will have on annual spending plans for the financial year ending June 2020, due to be announced in May.
Suleri said the first litmus test for the new finance minister would be the budget he presented: “It would be better if Hafeez Shaikh makes changes to the budget according to his priorities so that he could own and be answerable for it.”
But Nadeem ul Haq, a former head of the Planning Commission, said the shakeup would have little effect on the upcoming budget because it had already been finalized with input from the IMF. “They have been told about the budget by IMF,” he said.
On Thursday at a press conference in which he announced his resignation, Umar had warned against expecting “miracles” from the new finance minister.
“No one should expect from the new finance minister that things will be better in three months,” he said. “The next budget will be a difficult one.”
Haq concurred: “Pakistan’s economic conditions are so deeply complicated the not even a superman or Nobel laureate can solve them. There is no capacity in the existing bureaucratic system.”
“They have tried in the past by bringing in people like Shaukat Aziz,” Haq said, referring to a former finance and prime minister of Pakistan. “Now they are bringing in Hafeez Shaikh; if he will not work someone else will be brought in, the system will keep running like this.”
Suleri warned that the new finance minister had a rough road ahead of him.
“He will have to prepare mechanism for subsidies, strengthen social protection, control inflation, take care of those who are affected by the IMF and other contractionary policies,” Suleri said. “He would be fighting on both fronts, at the macro level for stability and at the micro level to ensure the survival of the people.”