Muhammad Aurangzeb, a former chief executive of Habib Bank Limited (HBL), has taken over as Pakistan’s new finance minister. The PDM government’s finance minister, Ishaq Dar, was a complete failure and it is good that he has not been reappointed and a fresh face has been introduced to run the finance ministry. It is a welcome departure from the past and one expects that with a new face a new set of policies will be adopted to extricate Pakistan from the deep economic morass it has fallen into.

The new finance minister faces a daunting array of problems, including high inflation, a back-breaking burden of debt, rising unemployment, and ever-widening budget and current account deficits. Over the years Pakistan has surrendered much of its sovereignty in the economic decision-making process which has resulted in our growing dependence on foreign loans. This underlines the need for developing a new economic paradigm to ensure greater autonomy and resilience in the face of global economic pressures.

The immediate challenge facing the new Finance Minister Is the successful conclusion of the second and final review of the ongoing US$ 3 billion Stand-By Arrangement (SBA) with the IMF, together with negotiating twenty-fourth extended facility (EFF) programme in order to meet our short and long term financial requirements.

Next is the upcoming federal budget for the fiscal year 2024-25 which has to be framed against the background of an unprecedented surge in debt service obligations and historically high fiscal deficits. Critical in this context is the growing disparity between the government’s escalating tax demands and the declining capacity of businesses to bear additional financial burdens. There is little doubt that the forthcoming IMF programme will impose stringent conditions, especially a new ruthless drive for revenue generation. How the new finance minister strikes a balance in the matter will be a test of his economic acumen.

Among other things, the new finance minister would have to work hard on debt restructuring — a critical requirement of the IMF programme. Debt restructuring is essentially a process to avoid the risk of a sovereign default by a country on its existing debt and includes negotiating rollovers or lower interest rates on existing loans.

According to a recent research study, Pakistan’s debt profile is “alarming” while the country’s borrowing and spending habits are “unsustainable”. Available figures show that the country’s total debt and liabilities — including domestic and external debt — stand at a whopping Rs77.66 trillion, or $271.2bn. The report said that since 2011, Pakistan’s external debt has doubled while the domestic debt has increased six-fold, of which the country would need to pay back an estimated $49.5bn in debt maturities — 30pc of it being interest. Experts rightly point out that taking more loans to repay previous loans is no solution. Instead, the country should strive to increase exports to earn precious foreign exchange. But our exports are stagnant and no government in the past bothered to devise a policy package of incentives to boost exports. On the contrary, energy costs have gone so high that our products have become uncompetitive in the international market.

The elephant in the room is our failure to address systemic issues which have perpetuated economic instability, highlighting the urgent need for comprehensive reforms and strategic interventions to move the country towards sustainable and inclusive growth. Addressing systemic inadequacies and inefficiencies is the need of the hour, with emphasis on enhancing tax compliance across sectors by rectifying existing disparities, ensuring fair taxation for all, including those currently either untaxed or taxed below their potential.

All said, there is an urgent need to develop a comprehensive strategy and blueprint for economic revitalization focusing on a more equitable distribution of national wealth and income. Needless to emphasise, without systemic accountability and ending the feudal and business entrenched nexus between influential elites and governing bodies, we cannot unlock the true potential of our economy. The new government should deal with a firm hand to rescue the economy from elite capture which has sapped all its energy. The royal perks and privileges of high officials should be abolished and extending extraordinary favours to the feudal classes should come to an end. We are landed with a fine economic mess which will take much time and patience to clear. The new finance minister’s skill as an economic manager is going to be sorely tested.