Muhammad Aurangzeb, a veteran banker with no previous experience in a political role, has been tasked with the navigating Pakistan through its current fiscal and economic crisis. A graduate of the Wharton School of Business at the University of Pennsylvania, Aurangzeb, 60, worked for 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 minister of finance and revenue is a departure from tradition for the newly reinstalled Prime Minister Shehbaz Sharif and his party, the Pakistan Muslim League (N), which has previously placed its trust in four-time finance minister Ishaq Dar.
Aurangzeb faces a daunting menu of challenges.
Pakistan is struggling under a formidable $130 billion external debt, equivalent to nearly a third of its $340 billion economy. With inflation soaring over 20% and following a currency devaluation that in the past two years has exceeded 50%, Aurangzeb’s first order of business will be to secure a multiyear loan from the International Monetary Fund on top of a $24 billion loan repayment due by June. The country’s foreign currency reserves stand at a mere $8 billion.
Getting the best possible deal from the IMF will only buy time for Aurangzeb to confront Pakistan’s more deep-seated issues.
“The new finance minister appears to be asked to find a way to get finance for a 24th IMF programme, with most of the previous 23 having failed for similar reasons: the inability of the political, business and military class to commit seriously to reform,” says Stefan Dercon, professor of Economic Policy at the Blavatnik School of Government and the Department of Economics at the University of Oxford. “Rather than going cap-in-hand asking for new finance, the new government and its backers in the establishment and business would need to design first their own plans, worth investing in by the IMF and others.” Such a plan, Dercon argues, will have to call for sacrifices from the elites, not just harm their opponents. “The only approach that can succeed is the one that redirects resources towards a more outward-oriented and less distorted economy, and an economy that serves the many, not the few.”