Muhammad Aurangzeb, a veteran banker with no political experience, was tasked with leading Pakistan through the current financial and economic crisis. A graduate of the Wharton School of Business at the University of Pennsylvania, Aurangzeb, 60, worked at major international banks including Citibank, ABN Amro and JPMorgan Chase before becoming president and CEO of Habib Bank, Pakistan’s largest commercial lender by assets, in 2018. His appointment last month as finance and revenue minister is a departure from the tradition of recently reappointed Prime Minister Shehbaz Sharif and his party, the Pakistan Muslim League (N), which had previously trusted four-time finance minister Ishaq Dar. .
Aurangzeb faces a number of difficult challenges.
Pakistan is struggling with a massive foreign debt of $130 billion, equivalent to almost a third of its $340 billion economy. With inflation rising over 20% and a currency devaluation that has topped 50% in the last two years, Aurangzeb’s first order of business will be to secure a multi-year loan from the International Monetary Fund in addition to repaying the $24 billion loan due by June. . The country’s foreign exchange reserves amount to only $8 billion.
Getting the best possible deal from the IMF will only buy time for Aurangzeb to address Pakistan’s deeper problems.
“It appears that the new finance minister is being asked to find a way to get funding for the 24th IMF program when most of the previous 23 failed for the same reasons: the failure of the political, business and military class to seriously commit to reform,” says Stefan Dercon , Professor of Economic Policy at the Blavatnik School of Government and Department of Economics at the University of Oxford. “Rather than begging tooth and nail for new funding, the new government and its supporters in the establishment and business will have to first come up with their own plans that are worth investing in by the IMF and others.” Such a plan, Dercon argues, would require sacrifice from elites rather than simply harming their opponents. “The only approach that can succeed is one that redirects resources toward a more outward-looking and less distorted economy, and an economy that serves the many rather than the few.”