Pakistan appoints economist Shaikh as finance chief

ISLAMABAD (Reuters) - Pakistan appointed on Thursday economist Abdul Hafeez Shaikh as the new chief of the Finance Ministry, where he will strive to maintain fiscal discipline and meet International Monetary Fund targets.

A money changer holds a 100-Pakistani Rupee (PKR) note while standing behind his make-shift booth at a street corner in Karachi September 23, 2009. REUTERS/Athar Hussain/Files

Shaikh, who is not a member of parliament and so cannot be appointed minister of finance, was named as adviser to Prime Minister Yusuf Raza Gilani on finance, Gilani’s office said.

Shaikh’s appointment has ended almost three weeks of speculation over who would take over at the Finance Ministry after former minister Shaukat Tarin resigned last month to focus on private business interests.

Shaikh was privatisation minister under former president Pervez Musharraf.

Analysts said financial markets would welcome the appointment of technocrat Shaikh instead of a politician.

“The market and investors will take his appointment positively as we have seen him working under the Musharraf regime when the economy was in a recovery phase,” said Mohammed Sohail, chief executive of Topline Securities Ltd.

“He played an integral and crucial part as a minister for privatisation ... He’s a far better choice than the other names that were being cited,” Sohail said.

Pakistan’s stock market had closed by the time the announcement was made but the main index ended higher on reports Shaikh had been offered the post and would accept it.

The Karachi Stock Exchange’s (KSE) benchmark 100-share index rose 26.39 points, or 0.26 percent, to end at 10,007.87 on turnover of 97.32 million.


In the currency market, the rupee ended firmer at 84.20/30 to the dollar, compared with Wednesday’s close of 84.25/30, although dealers said that was because of a lack of import payments and increased portfolio inflows.

Shaikh has been a World Bank country head in Saudi Arabia and is also a general partner in the growth capital company New Silk Route Partners, which focuses on private equity opportunities across Asia and the Middle East.

Analysts said Shaikh’s broad international experience should mean he will be in tune with what Pakistan needs to do to secure sustained international financial support -- raising taxes, taming inflation and generating more revenue to meet expenditure.

The resignation of the respected Tarin raised speculation he had been caught between the demands of the IMF, whose assistance depends on reforms, and the government.

Tarin negotiated an IMF emergency loan package of $7.6 billion in November 2008 to avert a balance of payments crisis. The IMF increased the loan to $11.3 billion in July 2009.

The government has pledged to keep the fiscal deficit at 4.9 percent of gross domestic product (GDP) in the 2009/10 (July-June) fiscal year under its agreement with the IMF, but it has said it could rise to 5.3 percent.

GDP growth this fiscal year is forecast at 3.3 percent but Tarin said in January it could go up to 3.4 percent, compared with 2 percent last year.

But revenue collection is a chronic problem which successive governments have failed to come to grips with.

Pakistan’s tax-to-GDP ratio of 9.2 percent is one of the lowest in the world. The government aims to raise it to at least 15 percent.

Additional reporting by Sahar Ahmed; Writing by Robert Birsel; Editing by Paul Tait