Pakistan’s finance minister Aurangzeb takes on daunting task to lift country out of economic turmoil

Pakistan’s new finance minister Muhammad Aurangzeb has started a challenging mission to lift his country’s economy amidst the most turbulent period in the nation’s economic history.

Earlier serving as the chief executive officer and president of Pakistan’s largest bank, HBL, Aurangzeb was selected for the role over several seasoned veterans, including Ishaq Dar, who held the position of finance minister in four previous administrations.

Pakistan finds itself in a precarious situation, lurching from one bailout program to another, with the International Monetary Fund deeming its debt as only marginally sustainable. The country grapples with Asia’s swiftest inflation rate, sluggish economic growth, and one of the world’s lowest tax-collection rates.

Assuming public office for the first time, Aurangzeb faces the urgent task of securing a fresh agreement with the IMF to stabilize an economy plagued by soaring inflation, dwindling reserves, and substantial external financing requirements.

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Pakistan’s current $3 billion, nine-month IMF bailout program expires next month, and the country’s economic team must negotiate a longer-term program immediately afterward.

Bringing with him a wealth of experience as a prominent banker and alumnus of JPMorgan Chase & Co., Aurangzeb enters his new role well-prepared to confront the formidable challenges ahead. However, it’s crucial to acknowledge the multitude of external factors that will influence his ability to navigate these challenges effectively.

Beyond his expertise, Aurangzeb must contend with a range of uncontrollable variables, including volatile domestic politics, strained relations with neighbouring countries such as India, Afghanistan, and Iran, and Pakistan’s vulnerable position on the front lines of climate change. These external pressures add complexity to an already demanding task, underscoring the magnitude of the undertaking facing Aurangzeb as he endeavours to stabilize Pakistan’s economy.

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According to Reuters, Aurangzeb left behind an annual salary of 352 million Pakistani rupees ($1.28 million), which made him one of the highest paid CEOs in the country, for a government position that pays roughly one-tenth the amount.

“Broadly, the finance minister’s job is to manage and steer the economy,” Mosharraf Zaidi, a former government adviser and founder of policy think tank Tabadlab based in Pakistan’s capital, Islamabad was quoted as saying by Bloomberg. “It seems simple when framed this way. In fact, it is one of the most complex jobs on the planet.”

Pakistan’s debt-to-GDP ratio is already above 70% and the IMF and credit ratings agencies estimate that the interest payments on its debt will soak up 50% to 60% of the government’s revenues this year. That is the worst ratio of any sizable economy in the world.