Pakistan's quest for IMF bailout costs finance minister, central bank governor and top revenue officer their jobs

Cash-strapped Pakistan's efforts to secure a financial bailout from the IMF has cost the country's finance minister, central bank governor and top revenue officer their jobs as the global lender pressed Islamabad to take more steps to ensure fiscal discipline.

The government on Saturday, May 4 night appointed Dr Reza Baqir  a Pakistani economist working for the International Monetary Fund (IMF)  as the governor of the State Bank of Pakistan (SBP). His appointment came a day after Tariq Bajwa resigned from the post of governor of Pakistan's central bank.

The government also appointed Ahmed Mujtaba Memon to the key post of Federal Board of Revenue (FBR) chairman, which also fell vacant on Friday after the removal of Jahanzeb Khan, the chairman of the tax collection body.

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The key appointments come only weeks after Finance Minister Asad Umar was asked to step down amid vital bailout negotiations with the IMF, suggesting the government wants to overhaul its financial team amid weakening growth rates and soaring inflation.

Last month, Prime Minister Imran Khan appointed Dr Abdul Hafeez Sheikh as Adviser on Finance in place of Umar, as inflation rose to its highest in six years.

Head of IMF Mission to Pakistan Ernesto Rigo is currently in Islamabad as the country hopes to strike a deal with the global lender for a three-year bailout package totalling around USD 6.5 billion, the Express Tribune reported.

The IMF officials are in the town for the last five days and there is still no convergence on the macroeconomic framework, it quoted sources in the Ministry of Finance as saying. The projections made by the finance ministry and the IMF team on every main economic indicator varied, they said.

The IMF is pushing Pakistan to embrace a more flexible rupee policy to end repeated boom-and-bust cycles, with many analysts arguing that the local currency is overvalued.

The government has also been frustrated by the low tax collection rates during its first year in office, with the disappointing figures threatening the prime minister's promises to build a welfare state for the poor, Geo News reported.

The SBP in March cut its economic growth estimates, forecasting the economy would expand 3.5 to 4 per cent in the 12 months to the end of June, well short of a government target of 6.2 per cent. The IMF paints a gloomier picture, predicting growth of 2.9 per cent in 2019 and 2.8 per cent next year, the report noted.

Meanwhile, Bajwa, the outgoing governor of the SBP, has said that he has resigned to avoid confrontation with the government.

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Replying to a question on a private news channel on Saturday on why he quit before completing his three-year term, Bajwa said a confrontation between the government and the central bank was not in the interest of the country.

"So, I preferred to tender my resignation instead of approaching courts," he was quoted as saying by Dawn newspaper.

Bajwa said that the country's interests were more important than his job. On Friday, Bajwa was asked to resign while he was in Islamabad for talks with the IMF. 

Last month, Umar, a close aide to Prime Minister Khan, was removed as finance minister, apparently over his failure to conclude discussions with the IMF for a new bailout.

IMF Director General Christine Lagard last month met Prime Minister Khan in Beijing. After her meeting, Lagard said she and Khan "discussed prospects for a comprehensive policy package and international financial support to help stabilise the economy of Pakistan, and also the need to strengthen governance and protect the poor."

Pakistan has so far received a total of USD 9.1 billion in financial aid packages from friendly countries like China, Saudi Arabia and the UAE during the current fiscal year.