Pakistan searches for new finance minister after Dar relieved of duties

Pakistan on Thursday began searching for a new finance minister a day after Ishaq Dar was relieved of his portfolio amid mounting headwinds for the economy.

The departure of Dar, widely credited with navigating Pakistan out of a 2013 balance of payments crisis, comes as the country is seeking to raise in excess of $1 billion on debt markets through a sukuk and a Eurobond in coming months.

The country is battling to stave off balance of payments pressures due to dwindling foreign currency reserves and a widening current account deficit in the $300 billion economy.

Among the names mentioned in local media as possible finance chiefs were Miftah Ismail, an economist who was until recently chairman of the country’s board of investment, and former finance minister Sartaj Aziz.

Others have speculated that Prime Minister Shahid Khaqan Abbasi might run the finance portfolio himself until the next general election, likely in August 2018.

Abbasi on Wednesday granted indefinite leave to Dar, who is receiving treatment in London for a heart condition. A warrant has been issued for his arrest after he missed several court appearances on corruption charges that he had amassed wealth beyond his known sources of income.

Worsening economic outlook

Dar has denied all charges and the case against Dar had along with Pakistan’s worsening economic outlook, led to mounting calls for him to resign.

“Dar’s exit was expected for over a week now, and there were already indications other people in the government were looking at aspects related to finance,” said Saad Hashemy, chief economist for Topline Securities Pvt.

“The prime minister and a few other people were taking care of economy-related matters.”

Whoever runs the finance ministry, few expect it to stray from Dar’s commitment to a stable rupee, which has been endorsed by Abbasi.

The ruling Pakistan Muslim League-Nawaz (PML-N) party has been reluctant to allow the rupee to weaken ahead of looming elections as it may stoke inflation, though many investors and economists say the move is needed to shore up lagging exports.

Fawad Khan, head of research at BMA Capital, said Dar’s departure might give some investors pause ahead of the Eurobond and sukuk offerings.

“It is possible that some people might not participate in the process or demand a high yield,” Khan said.