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Pakistan’s largest bank’s CEO has been chosen to steer the nation out of its economic turmoil.
Pakistan’s Karachi, March 11 (Reuters) – Muhammad Aurangzeb, one of the highest paid executives in Pakistan and a highly experienced private banker, was appointed by Prime Minister Shehbaz Sharif to be Finance Minister of Pakistan despite having no prior experience in public office.
Aurangzeb, the president and chief executive officer of HBL, the biggest bank in Pakistan, was chosen over a number of seasoned managers of the $350 billion economy, including Ishaq Dar, the finance minister in four previous governments.
Shortly after taking the oath of office, HBL announced his resignation.
HBL Chairman Sultan Ali Allana stated, “Aurangzeb now embarks on a new chapter of service to the nation, underscoring a commitment to national responsibility.”
For a government job that pays about a tenth of that, Aurangzeb would be leaving behind an annual compensation of 352 million Pakistani rupees ($1.28 million), making him one of the best paid CEOs in the nation.
Finance Minister of Pakistan
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At a time when Pakistan’s Finance Minister desperately needs a new IMF deal to support an economy beset by high inflation, limited reserves, and a heavy need for external finance, this is his first taste of public service.
Next month marks the end of Pakistan’s current $3 billion, nine-month IMF bailout program, and it is imperative that the nation’s economic team begin negotiations on a longer-term program right once.
Although Aurangzeb does not yet hold a seat in parliament, he has six months to change that. Parliamentarians are a prerequisite for all cabinet ministers.
As per the bank’s Finance Minister statement, he guided HBL to a record profit in 2023 of 113.6 billion Pakistani rupees ($407 million), a 47% increase from the previous year, and a turnaround in its foreign businesses.
With a balance sheet of 5.5 trillion Pakistani rupees ($20 billion), the bank has expanded its operations in a nation where the percentage of people with bank accounts is among the lowest globally.
Over 50% of HBL is owned by the Aga Khan Fund for Economic Development (AKFED), which is situated in Switzerland.
As the CEO of HBL, Aurangzeb has collaborated extensively with the government on a number of projects, such as helping to distribute 90 billion rupees to about 7.5 million people who received Finance Minister assistance from the state during the COVID-19 pandemic.
The Wharton MBA has vast expertise dealing with international markets and has also held the position of CEO of JP Morgan’s Global Corporate Bank, which is headquartered in Asia.
In the past, Aurangzeb has emphasized the use of technology for business expansion, stating that his objective at HBL was to establish the bank’s reputation as a tech company that had a banking license.
But navigating Pakistan out of its most recent economic catastrophe and restoring stability to a nation beset by debilitating boom-bust cycles—which have forced the nation into more than 20 IMF programs in the 76 years since it gained independence—will be very different challenges.
The new finance tsar will have around three months to draft a federal budget that must find a challenging balance between enacting strict reforms and reviving a flagging economy, Pakistan’s Finance Minister to negotiating a new IMF program.
In order to support its low reserves—which are essential for meeting Pakistan’s significant needs for external Finance Minister—and revive its faltering economy, which shrank by -0.2% last year, Pakistan must also draw in foreign investment.
In addition, he will have to collaborate with the formidable military, which has recently become more involved in the nation’s financial decision-making and formally influences policy through a strong economic committee that the army commander is a member of.
With the Pakistan Peoples Party pledging to assist the government issue-by-issue, Sharif’s Pakistan Muslim League-Nawaz (PML-N), which is running a minority government, would need the backing of various parties to pass important legislation.
With little fiscal room, efforts to calm the public’s mounting ire over historic inflation that is currently hovering around 30% will also be difficult.
Pakistan‘s debt-to-GDP ratio is already over 70%, and this year’s interest payments on its debt are expected to consume 50% to 60% of the country’s government revenue, according to estimates from the IMF and credit rating agencies. Of all the major economies in the world, that percentage is the worst.
$1 equals 274.5500 rupees in Pakistan.
