Prime Minister Imran Khan on Monday unceremoniously removed Finance Minister Hafeez Shaikh due to differences over the International Monetary Fund programme, particularly on recommending sweeping governor-centric powers to the central bank.
Senator Shibli Faraz, in an interview with a private television channel, announced that the government has decided to remove Dr Abdul Hafeez Shaikh from the post of finance minister and replace him with Minister for Industries and Production Hammad Azhar.
According to Shibli, Prime Minister Imran Khan decided to bring in a new finance team in view of “inflation that had taken place”.
Azhar will be the third economic czar appointed by the premier in his two-and-a-half-year tenure.
Shibli said Azhar would strengthen the prime minister’s economic team and address the issues of inflation being faced by the people of Pakistan.
He said the prime minister was not satisfied with the performance of his old economic team but expressed the hope that Azhar would achieve success in controlling inflation so that poor masses could get respite from high prices of essential items in near future.
“I am honoured to be entrusted with the additional charge of finance by the prime minister,” Azhar tweeted. He said that Pakistan’s economy had made significant gains towards stabilisation since 2018 and he would continue to consolidate these gains and strengthen the growth momentum.
Azhar also vowed to protect the people from rising inflation.
A cabinet source told The Express Tribune that the prime minister was not happy with Shaikh for the past almost 10 days. He said that the reason was the commitments given to the IMF for the revival of the $6 billion bailout programme.
The Express Tribune in a detailed report on March 9 had for the first time disclosed the design to give absolute autonomy to the State Bank of Pakistan at the expense of the national economy. Many amendments that are proposed in the bill are not even recommended by the IMF.
The cabinet had approved the bill on March 9 – without discussing its details.
Like the first PTI finance minister Asad Umar, Azhar too is the choice of Prime Minister Imran Khan and is considered to be his close confidante.
Shaikh’s removal came as a surprise, as the ruling party was contemplating making another attempt at getting him elected as senator either from Punjab or Khyber-Pakhtunkhwa.
In December last year, Shaikh had been elevated as finance minister after serving as adviser to the PM on finance for 21 months. However, as per Article 91 (9) of the Constitution, he cannot remain a minister for more than six months until he is elected to one of the houses.
Thus, it was necessary for him to be elected to the Senate this time around in order to continue as the finance minister after June.
Reacting to the development, PPP Chairman Bilawal Bhutto Zardari declared it a “victory of the PDM (Pakistan Democratic Movement)”.
The IMF board last Tuesday approved four reviews of Pakistan’s economy and the release of the next loan tranche. The IMF has not disbursed the $500 million tranche.
Pakistan has slapped Rs140 billion taxes with a promise to introduce over Rs700 billion more in June. It also increased electricity prices by 16% and committed to increase prices by another 36% from April to October this year under the Circular Debt Management Plan.
Both these measures were highly inflationary but the government had to concede to revive the programme.
Sources said that the PM had to face a difficult situation over agreeing to an absolute autonomy for the central bank. There has been criticism against the government for conceding to such sweeping powers from all sections of society, including from some quarters, the sources said.
The powers proposed by amending the SBP Act 1956 were beyond the acceptable threshold of autonomy that any institution needs to work free of political influence, the sources said.
They said that everything revolves around the personality of the SBP governor. He would be appointed by the president for five years, with the option of another term of five years, but his salary will be determined by the SBP board.
The governor will be the chairman of the SBP board, the chairman of the Monetary Policy Committee and the chairman of the Executive Committee, according to the bill.
The board, being headed by the governor, will recommend the names of the directors of the board and the deputy governors of the SBP to the federal government for appointment, according to the bill.
The governor can go abroad without the federal government’s permission, according to the bill. The government will have to consult the SBP before making legislation on matters pertaining to the SBP, according to the bill.
The SBP will be free to make its decisions about monetary policy and exchange rate policies without any regard for economic growth and employment generation, the bill showed.
However, the sources said that the PM had to be properly briefed about the adverse implications of the conditions set by the IMF for the revival of the programme, adding that the PM changed his mind only after increasing criticism from various quarters.
It is not clear whether the PM will also hold the governor responsible for pushing through such amendments which has caused embarrassment for his government and took a toll on Shaikh.