Nawaz Sharif, whose party gained most seats in Pakistan’s May 11 election and is set to form the next government, plans to name Mohammad Ishaq Dar as finance minister, ahead of a national budget in June.
The appointment of Dar had been agreed in meetings before the election and has since been confirmed, Mamnoon Hussain, a central senior vice president of the Pakistan Muslim League-Nawaz, said by phone yesterday. Siddiq-ul-Farooq, a party leader and spokesman, also said Dar will head the government’s economic team as finance minister.
Dar, 64, would have about a month to prepare a national budget at a time when sluggish growth and one of the region’s lowest rates of tax collection risks a widening of the fiscal deficit. He may also have to negotiate a bailout with the International Monetary Fund after foreign exchange reserves plunged 40 percent from a year ago, to less than two months of imports, according to central bank data.
“Dar will need a much stronger team this time because the situation is much worse,” Sakib Sherani, chief executive officer at Macroeconomic Insights, an Islamabad research firm, said by phone today. “The balance of payments is an immediate challenge, they will have to figure out the holes in public finances and damage to public sector companies.”
Sharif’s party won the most seats in the voting. His party had won 123 contests for the lower house of parliament, about four times the number of his nearest rival, according to the latest tally of official results from the Election Commission of Pakistan. Dar didn’t answer three calls made to his mobile phone.
“For the first time, a government in Pakistan has been removed by the people for misgovernance,” Nasim Beg, executive vice chairman of the Arif Habib Corp., which runs cement and fertilizer plants, said in an interview in Karachi today. That means Sharif will understand the consequences of failing to deliver. He will enjoy a “genuine people’s mandate,” to fix the economy and address the energy crisis, Beg said.
Sharif said in a recent interview with the Geo channel he’d hire professional managers for loss-making state companies and end the cycle of debt that has crippled electricity generation and transmission companies.
State-owned firms -- especially those in the power sector - - are “bleeding” cash and will need private managers to turn them around, Pakistani billionaire Mian Mohammad Mansha, who heads MCB Bank Ltd. and Nishat Mills Ltd., said in an interview last month. The government took over 391 billion rupees ($3.97 billion) of debt from the books of public sector enterprises in the year ended June 30, according to the State Bank of Pakistan.
“A new loan agreement with the International Monetary Fund would be credit positive since it could avert a balance-of-payments crisis and institute a framework for fiscal discipline,” Moody’s Investors Service said in an overnight statement.
The election results set the stage for the longer-term stability of the country’s sovereign rating of B minus, Standard & Poor’s Ratings Services said in a statement from Singapore yesterday. That’s six levels below investment grade.
“The economy is one of the top most priorities,” Iqbal Zafar Jhagra, secretary general of the party, said by phone from Peshawar. “You rectify your economy and all other problems will be automatically resolved.”
Dar was the country’s commerce minister in Sharif’s first term and finance minister in 1999, when Pervez Musharraf seized power and sacked the cabinet. Now the opposition leader of the Senate, or parliament’s upper house, Dar spent more than a year in jail under Musharraf over corruption charges that never went to trial.
He has a bachelor’s degree in commerce from the University of Punjab and has been a director of the World Bank, Asian Development Bank and Islamic Development Bank, according to his profile on the Senate website. He also served as finance minister for three months in 2008 until his party quit President Asif Ali Zardari’s alliance.
“The government has a majority and that makes it easier for them,” said Reehana Raza, director at the Institute of Development and Economic Alternatives, a Lahore-based think-tank. “Solving the energy crisis and spurring growth are the key economic challenges. Dar is the most experienced man in the team, he’s the done the job before and knows it well.”
Pakistan was among the 15 lowest revenue-gathering nations in the world as a percentage of GDP, according to the U.S. Central Intelligence Agency’s World Fact Book 2012. The South Asian nation recorded the highest budget deficit in two decades in the fiscal year through June as it missed its tax target.
The nation’s fiscal deficit may be 7.5 percent of gross domestic product this year, wider than the government’s target of 4.7 percent, the IMF said in January.
Sharif, whose family owns steel and sugar mills, ended state monopolies in shipping, airlines and telecommunications during his two terms as prime minister in the 1990s.
Pakistan’s $210 billion economy grew an average 3.8 percent each year during Sharif’s stints as premier, according to data on the World Bank’s website. Under Zardari’s five-year administration, growth slowed to an average 3 percent, less than half the annual pace of the previous five years, as the economy was crippled by record power blackouts lasting as long as 18 hours a day.
The KSE 100 Index rose as much as 1.3 percent, extending yesterday’s gains. Overseas investors bought $202 million worth of Pakistani shares this year, the most since the same period in 2010, according to data compiled by Bloomberg.
The finance minister will have to present the national budget for the year starting July 1 next month.
Sharif’s party dominated its Punjab bastion in the election and reduced Zardari’s Pakistan Peoples Party to a third of its previous strength in parliament, according to the official results.
Pakistan Muslim League-Nawaz will seek the support of independents to form Pakistan’s government, Shahbaz Sharif, a party leader, told reporters in Lahore yesterday.
The ballot marked the first time a civilian government completed its term and transferred power to a successor. Pakistan has been ruled for half its history by the military. The voter turnout was about 60 percent, according to the Election Commission of Pakistan, compared with 44 percent in the 2008 election.