Dr Omer Javed | Dr Abdul Hafeez Sheikh has been appointed as the new Advisor for Finance. Previously, he served as finance minister for three years from March 2010 till February 2013. He arrives at a time when negotiations with the International Monetary Fund (IMF) for a new programme are entering its final stage. At the same time, the performance of macroeconomy and economy growth during his last stint also raises big questions. In this regard, the burden of economic history is quite heavy, and hopefully, the Prime Minister Imran Khan will not be let down in his choice; albeit a risky one to say the least. This economic performance need not be repeated by the new advisor for finance since the future of both the country and the Pakistan Tehreek-e-Insaf depends on it. With Hafeez Sheikh as finance minister, Pakistan approached the IMF in December 2010 with the request- which was granted by the IMF- to extend the duration of Standby Arrangement (SBA) programme, which was earlier negotiated in late 2008, so that the country could implement the remaining policies under the fifth and sixth programme review. Yet those could not be completed and the SBA programme was terminated inconclusively by the IMF in September 2011. Later on, in November 2012, at the time of completion of the First Post-Programme Monitoring discussion with the IMF, and 33 months into the tenure of the finance minister, the IMF highlighted the less-than-satisfactory position of the economy in these words, “Pakistan’s economy faces many challenges. Read more: Where is the discussion on policy? Deep-seated structural problems and weak macroeconomic policies have continued to sap the economy’s vigor. Real GDP growth over the past four years has averaged only about three percent annually, and is projected to be about three and a quarter percent in 2012-2013, insufficient to achieve significant improvement in living standards and to absorb the rising labor force.” Looking back, the above could be amply substantiated by the economic analysis from the time of Dr Sheikh as finance minister. Table 1: Lack of negative correlation between the policy rate and inflation Sr. No. Months Policy Rate (%) CPI Inflation (%) 1 Mar-10 12.50 12.9 2 Apr-10 12.50 13.3 3 May-10 12.50 13.1 4 Jun-10 12.50 12.7 5 Jul-10 12.50 12.3 6 Aug-10 13.00 13.2 7 Sep-10 13.50 15.7 8 Oct-10 13.50 15.3 9 Nov-10 14.00 15.5 10 Dec-10 14.00 15.5 11 Jan-11 14.00 13.9 12 Feb-11 14.00 12.8 13 Mar-11 14.00 13.0 14 Apr-11 14.00 12.5 15 May-11 14.00 12.6 16 Jun-11 14.00 13.3 17 Jul-11 13.50 12.4 18 Aug-11 13.50 11.6 19 Sep-11 13.50 10.5 20 Oct-11 12.00 11.0 21 Nov-11 12.00 10.2 22 Dec-11 12.00 9.7 23 Jan-12 12.00 10.1 24 Feb-12 12.00 11.0 25 Mar-12 12.00 10.8 26 Apr-12 12.00 11.3 27 May-12 12.00 12.3 28 Jun-12 12.00 11.3 29 Jul-12 12.00 9.6 30 Aug-12 10.50 9.1 31 Sep-12 10.50 8.8 32 Oct-12 10.00 7.7 33 Nov-12 10.00 6.9 34 Dec-12 9.50 7.9 35 Jan-13 9.50 8.1 36 Feb-13 9.50 7.4 Average (36 months) 12.35 11.54 It can been seen that even when Ministry of Finance and State Bank of Pakistan (SBP) persisted in a prolonged way, as evidenced by the three boxes in the table above, whereby even though it could be seen that tight monitory policy was quite insignificant in denting CPI (consumer price index) inflation (or simply inflation) in the preceding months, the same policy was repeated for 10 months during which the policy rate was kept at a high level of 12 percent. Hence, even with keeping high levels of policy rate, inflation remained quite stubborn. Read more: Textile sector of Pakistan Furthermore, during the 36-month tenure of Dr Sheikh as finance minister, while the policy rate stood at a high of 12.35 percent on average, the average inflation stood at 11.54 percent. This policy failure took a toll on economic growth, employment, and other macroeconomic indicators, whereby the country remained under the situation of stagflation – high inflation, high unemployment, and low growth. Here, the two floods of 2010 and 2011 only chipped off a slight portion from economic growth, while the rest was quite evidently a result of lack of correct policy choices being adopted. Table 2: Stagflation- high inflation and unemployment, and low growth Fiscal Year (FY) Real GDP growth (%) Fiscal Deficit (% of GDP) Exports (US$; billion) Unemployment Rate (%) CPI Inflation (%) 2010/11 2.4 6.6 25.4 6.0 13.9 2011/12 4.4 8.5 24.6 11.0 2012/13 3.6 8.0 24.8 6.2 7.4 Average 3.5 7.7 24.9 10.8 The above table indicates that even when the long phase of tight monetary policy was adopted inflation could not be dented in any sustainable way, while fiscal deficit also averaged at a high level of 7.7 percent of the GDP (gross domestic product, or simply national income) during FY 2010-2013. Read more: Naya Pakistan’s mixed economic policy signals? – Dr. Omer Javed This policy persistence took a heavy toll on both economic growth which remained at a paltry level of 3.5 percent during the three fiscal years on average, and even lower than the one projected for this fiscal year at 2.4 percent – and the unemployment rate, which actually increased from the already high level of six percent to 6.2 percent. At the same time, exports continued to hover around the $25 billion mark during the three fiscal years. This economic performance need not be repeated by the new advisor for finance since the future of both the country and the Pakistan Tehreek-e-Insaf depends on it. Dr. Omer Javed holds Ph.D. in Economics from the University of Barcelona, Spain. A former economist at International Monetary Fund, he is the author of Springer published book (2016), ‘The economic impact of International Monetary Fund programmes: institutional quality, macroeconomic stabilization, and economic growth’. He tweets at @omerjaved7. The views expressed in this article are author’s own and do not necessarily reflect the editorial policy of Global Village Space.<doc-sep>Newly-appointed adviser on finance Dr Abdul Hafeez Sheikh took charge of his post on Saturday. The finance adviser will also have the charge of Revenue and Economic Affairs Division. Sheikh's designation will be at par with that of a federal minister. Sheikh, a Pakistani political economist of international repute with over 30 years of experience, has served as the finance minister from 2010 to 2013. In 2012, he became an active member of Pakistan Peoples Party and successfully contested in the 2012 senate elections. After leaving the government, Sheikh was general partner of an international investment company, headquartered in New York, which set up a $1.38 Billion fund for investments in Asia. Sheikh replaces Asad Umar who stepped down from his post as Finance Minister on Thursday after eight months in charge. The resignation by the finance minister followed sacking of Petroleum Minister Ghulam Sarwar over unsatisfactory performance, according to sources.<doc-sep>Dr. Abdul Hafeez Sheikh appointed as Finance Advisor to PM President Dr. Arif Alvi, on the advice of the Prime Minister, has appointed Dr. Abdul Hafeez Sheikh as Advisor to the Prime Minister on Finance, Revenue and Economic Affairs with immediate effect. Dr. Abdul Hafeez Sheikh will have the status of a federal minister. A notification to this effect has been issued by Cabinet Division.<doc-sep>Dr Abdul Hafeez Sheikh. Photo: File ISLAMABAD: Newly-appointed adviser on finance Dr Abdul Hafeez Sheikh took charge of his post on Saturday. The finance adviser will also have the charge of Revenue and Economic Affairs Division. Sheikh's designation will be at par with that of a federal minister. Sheikh, a Pakistani political economist of international repute with over 30 years of experience, has served as the finance minister from 2010 to 2013. In 2012, he became an active member of Pakistan Peoples Party and successfully contested in the 2012 senate elections. After leaving the government, Sheikh was general partner of an international investment company, headquartered in New York, which set up a $1.38 Billion fund for investments in Asia. Sheikh replaces Asad Umar who stepped down from his post as Finance Minister on Thursday after eight months in charge. The resignation by the finance minister followed sacking of Petroleum Minister Ghulam Sarwar over unsatisfactory performance, according to sources.<doc-sep>
ISLAMABAD: Prime Minister Imran Khan appointed Dr Abdul Hafeez Sheikh as Adviser on Finance, while accepting the resignation of former finance minister Asad Umar, an official notification said on Friday. The notification said that the newly-appointed adviser on finance will also have the charge of Revenue and Economic Affairs division. It was further mentioned that Sheikh's designation will be at par with that of a federal minister. The cabinet reshuffle comes at a time of growing pressure with the rupee losing 30 percent of its value since the start of 2018, stirring sharp inflation. Ijaz Ahmed Shah has been appointed as the interior minister, whereas Fawad Chaudhry handed over Ministry of Science and Technology, according a statement issued from PM House. Minister of State Shehryar Afridi has been handed over the Ministry of States and Frontier Regions (SAFRON), while Ghulam Sarwar Khan appointed minister for aviation the statement said. Azam Swati has been appointed as federal minister for parliamentary affairs, it said, adding that Federal Minister for Privatisation Mohammad Mian Soomro shall cease to hold additional portfolio of Aviation Division. The statement further read that Dr Zafarullah Mirza, Firdous Ashiq Awan and Nadeem Babar have been appointed special assistants to the prime minister for national health services, information and petroleum division, respectively. Abdul Hafeez Sheikh has been been appointed as special assistant to prime minister on finance, it added. Sheikh, a Pakistani political economist of international repute with over 30 years of experience, has served as the finance minister from 2010 to 2013. In 2012, he became an active member of Pakistan Peoples Party and successfully contested in the 2012 senate elections. After leaving the government, Sheikh was general partner of an international investment company, headquartered in New York, which set up a $1.38 Billion fund for investments in Asia. Health Minister Amir Mehmood Kayani have been deprived of his portfolio, according to the sources. The cabinet overhaul comes hours after Finance Minister Asad Umar stepped down from his post. Umar announced earlier in the day that he will no longer be part of Prime Minister Imran Khan’s federal cabinet. “As part of a cabinet reshuffle PM desired that I take the energy minister portfolio instead of finance. However, I have obtained his consent to not take any cabinet position. I strongly believe @ImranKhanPTI is the best hope for Pakistan and inshallah will make a naya Pakistan,” he tweeted. Umar, the former CEO of Engro, was handpicked by PM Khan as the finance minister to improve economic affairs of the country. The resignation by the finance minister followed sacking of Petroleum Minister Ghulam Sarwar over unsatisfactory performance, according to sources.