NationalVOLUME 16 ISSUE # 17

Finance minister’s removal: An admission of economic failure?

Prime Minister Imran Khan has removed his Finance Minister Dr Hafeez Shaikh, weeks after he had voluntarily offered to resign in the wake of his Senate defeat. His ignominious ouster not only points out the mercurial nature of the prime minister and his scant respect for his colleagues but also an admission of economic failure despite tall claims of economic revival.

Undoubtedly, it is the prerogative of the prime minister to reshuffle his cabinet as often as he desires, but the way Hafeez Shaikh was removed was shocking for the whole nation. It is true that he could not retain his position after he failed to become a member of the Senate in the light of a court ruling, under which an unelected person cannot hold a ministerial post for more than six months. He still had a few more months to continue his job. His ouster became more shameful after the fact that he had tendered his resignation voluntarily to the prime minister after his defeat in the Senate election at the hands of PPP candidate Yusuf Raza Gilani. The prime minister could have fielded him from the Punjab, if he wanted to ensure his easy success. Instead, he was asked to contest the election at the Islamabad seat against a political heavyweight, which paved the way for his defeat. Still, he offered to resign and the prime minister asked him to continue his work and then suddenly removed him. He did not deserve it. His disgraceful removal must also have demoralised other ministers.

According to some analysts, Hafeez Sheikh was removed for signing a “tough” agreement with the International Monetary Fund (IMF), which the government believed had stifled economic activity. Under the bailout package, Pakistan was given an unrealistic revenue collection target of Rs5.5 trillion for 2019-20. It was also forced to adopt harsh monetary and fiscal policies, which led to massive job losses and inflation, even before the onset of the pandemic. It is said he could have been shown the door much earlier, but the onslaught of the pandemic saved him, because it forced the country to reverse the harsh monetary and fiscal policies agreed with the IMF.

However, the agreement with the IMF was signed in 2019 and one cannot expect Prime Minister Imran Khan to wait for so long to punish him for his “wrongdoing.” A major reason could have been that Hafeez Shaikh could not continue his job beyond June, under a court ruling, and it was necessary to remove him, because a new finance minister was needed to unveil the national budget. It is also believed that his behaviour with elected representatives had become even harsher after his Senate loss. He was not available to them easily and would make even ministers wait outside his office for hours when they came seeking funds for development projects in their constituencies. When complaints by ministers and MPs grew against him, the prime minister removed him. However, the complaints were not new, but could have paved the way for his ouster now because the prime minister is now thinking of winning the next election. He would have ignored the complaints in the past because he believed the economy was improving. As the economy has started showing signs of recovery, he would have thought of providing relief to the common man through development funds and subsidies on essentials, especially when the next general election is not far off.

According to some experts, Hafeez Shaikh was sacked for his failure to improve the performance of departments and entities that came under his jurisdiction. During his 23 months, he appointed four chairpersons of the Federal Board of Revenue (FBR) and three finance secretaries. It created a bad impression about his performance.

However, Hafeez Shaikh’s removal has muddied tall claims of Prime Minister Imran Khan that Pakistan’s economy is recovering fast. It is a fact that the prime minister would have created space for him if he had been satisfied with his performance and his ouster means the economy is not performing well. According to some ministers, he was removed for rising inflation in the country. If it was the case, it was not his fault. It is the result of IMF policies which Pakistan had to enforce in return for a $6b bailout package. Going to the IMF was the decision of Prime Minister Imran Khan and his government, not Hafeez Shaikh. Then, the provincial governments were responsible for taking action against profiteers to reduce prices of essentials, not the finance minister. He was punished for a crime he did not commit.

Prices can be brought down if the federal government takes measures to improve the value of the rupee against the dollar and cuts tariffs of electricity and gas. It is the responsibility of the provincial governments to take action against profiteers to ensure the sale of essentials at the fixed rates. The former finance minister could not be blamed for it. Inflation is not projected to ease in the near future and it is yet to be seen how many finance ministers are scapegoated for it.

Pakistan faces chronic economic woes, including dwindling foreign exchange reserves, low exports, high inflation and growing fiscal and current account deficits. The ouster of the finance minister ahead of the budget is being seen as an admission of the government’s failure to revive the economy. Experts say the economy will take years to revive and the government has removed him to divert the public attention from their real issues.