ISLAMABAD (BLOOMBERG) - Pakistan's new government is said to have selected a close ally of Prime Minister Shehbaz Sharif and his family as the new finance chief ahead of crucial talks with the International Monetary Fund, according to two people familiar with the matter.
Miftah Ismail has been an economic aide to three-time premier Nawaz Sharif, who is the older brother of the new prime minister. Ismail is likely to be named along with the rest of the cabinet within 24 hours, said one of the people.
The government, formed through an alliance of several political parties that voted out former cricket star Imran Khan, is still in talks to distribute portfolios and a final decision is yet to be made, the people said.
Ismail, who was briefly finance minister in 2017-2018, will be among the officials responsible for negotiating with the multilateral lender to resume a programme that went into jeopardy after Khan unexpectedly cut energy prices, despite an agreement with the lender for the opposite.
He will lead an economic team that also has to deal with Asia's second-fastest inflation and falling foreign exchange reserves that have dropped to levels that can fund just a couple of months of imports. The nation's central bank has already increased interest rates by the most since 1996 to help ease the crisis.
Ismail declined to comment on his potential appointment, while ruling party spokeswoman Marriyum Aurangzeb and the Prime Minister's Office didn't immediately respond to requests for comment.
In a sign that he is set to clinch the finance chief role, party leader Maryam Nawaz shared on Twitter a picture of Ismail sitting next to Shehbaz Sharif on Wednesday (April 13). Ismail also held a press conference on Tuesday, hastily called by the Finance Ministry. He told reporters that inflation couldn't be immediately controlled because of the "flawed policies" of the Khan government. The first thing to do was to negotiate with the IMF and convince them to ease the tough conditions so that the government could provide relief to the people, he said.
For now, the government hadn't decided whether to raise fuel prices, Ismail said, which is a key condition for IMF loans. Pakistan is under pressure roll back subsidies given to energy prices that would increase electricity and gasoline costs. It will also have to keep a lid on excessive revenue spending that is typically seen in the run-up to elections in South Asia until the IMF programme ends in September and there's speculation polls may happen sooner than later.
"Ismail has a very brief track record in which he resorted to expansionary fiscal policy. We were running a big deficit. What did Ismail do going into the elections? He provided further relief on personal income taxes," said Zubair Ghulam Hussain, chief executive officer at Insight Securities, referring to the politician's time as finance minister under then-premier Shahid Khaqan Abbasi's administration.
"The problem here is the economy needs difficult fiscal policy decisions for which there would be political ramifications ahead of the elections. They may shy away from a few of them," Hussain said.
Having graduated from Wharton with a doctorate in public finance, Ismail has been defining economic and energy policy of the Pakistan Muslim League-Nawaz. Hailing from an industrialist family in Karachi, Ismail has seen common cause with the Sharif family who are also entrepreneurs to push pro-business policies, including an automobile policy that helped to break the decades-old dominance of Japanese car manufacturers in the country.
He is regarded as a party loyalist and there's a possibility he will eventually hand over the portfolio to Mohammad Ishaq Dar, another former finance minister whose son is married into the Nawaz Sharif's family, if he returns from London. Dar has been living there along with party chief Nawaz Sharif who went into self-imposed exile after a Pakistan judge suspended his seven-year imprisonment in a corruption case.
For now, Ismail has been touting Shehbaz Sharif's plans to increase civil service pensions, salaries for the lowest paid government servants as well as the minimum wage as a way to help people deal with soaring living costs.
Since the change of government, Pakistan's rupee strengthened and is now poised for its best week in five months. The benchmark KSE-100 Index had its best two-day rally in two years after it became clear that Khan was getting ousted, making many in the market hopeful about the economic prospects.
"Being Pakistan's finance minister is probably one of the hardest jobs in the country right now," said Ahfaz Mustafa, chief executive officer at Ismail Iqbal Securities. "The ruling party generally tends to be a pro-growth but it is essential they first achieve fiscal consolidation. I think Dr. Ismail is one of the best people to deal with it."