Pakistan’s Finance Minister Steps Down Amidst Worsening Economic Crisis
Asad Umar, Pakistan’s Finance Minister, announced his resignation on Thursday, April 18. The minister stepped down after Prime Minister Imran Khan attempted to shift Umar to lead the energy sector instead. The former CEO has resigned just weeks before Pakistan was set to finalize its deal with the IMF.
Umar, who was the CEO of Pakistan’s largest private conglomerate, Engro Corp, rejected the position in the energy sector.
The country has been in the middle of negotiating its 13th economic support program from the IMF as a means to alleviate its deteriorating economy. The deal has been delayed twice before and is likely to be delayed again due to Umar’s resignation.
Delays have also been due to disagreements regarding the exchange rate policy. Khan’s administration has been reticent to agree to the IMF’s proposal of a free float of the currency. This would lead to greater devaluation of the local rupee and increase the tax base.
In the eight months that Umar served as Finance Minister, he has drawn massive criticism for his handling of the current economic crisis. Umar’s defends his negotiation with the IMF and explains that he has brought the deal close to finalization.
“It was the worst economy that we inherited,” said Umar. “We’ve seen improvement, but we are nowhere near an ideal situation.”
Inflation rates in Pakistan are at a five-year high and the rupee has depreciated by 35 percent since December of 2017. Predictions for economic growth varies between the central bank and the IMF. The former predicts a 3.5 to 4 percent growth for the year while the latter predicts a 2.9 percent growth rate. Growth, in general, has slowed from the 5.2 percent growth in 2018.
The country’s credit score was also downgraded by the S&P Global Ratings in the past month due to its delay in finalizing the support program. Pakistan has received short-term loans of about $7.2 billion from China and Saudi Arabia to ease some of the economic burdens.
Khan’s economic plans for the country have been unable to come to fruition due to a balance of payment crisis and a depleted treasury. Umar has been a close ally to Khan and loyal member of Khan’s party, Pakistan Tehreek-e-Insaf, which Umar joined seven years ago.
Abdul Hafeez Shaikh, a political economist, has been appointed as the intermittent Finance Minister by Khan. The new minister has over 30 years in experience policymaking and has worked at Harvard University and the World Bank. Shaikh served as Finance Minister for Pakistan from 2010 till 2013.
Umar is the fifth person to resign from the prime minister’s cabinet in the eight months that Khan has been in power. The former minister expressed a firm belief in Khan’s leadership despite his own resignation and that he was neither angry nor disappointed with the decision.
"To be honest, I did not feel any [disappointment]. In the last eight months, I had worked so much that I told my family that I was on the verge of a physical burnout,” explained Umar on the ARY news program, Off the Record.
Along with Umar’s resignation, nine other ministerial appointments were announced. Cabinet changes included moving Information Minister Fawad Chaudhry to the science and technology ministry and appointing Brigadier Ijaz Ahmed Shah to lead the Interior Ministry.
Umar’s resignation comes just a week before the government was set to announce its first budget.
“At a time when we need clarity on the way forward, the finance minister’s departure will only create uncertainty,” said Abid Suleri, an economic adviser for Khan. “The public will see this as evidence of disagreement and disunity in high quarters of the government. It’s not a good image.”