NEWSMAKER-Shaikh likely to push Pakistani fiscal discipline

By Michael Georgy

ISLAMABAD, March 18 (BestGrowthStock) – Abdul Hafeez Shaikh, the
man charged with steering Pakistan’s economy, has wide
financial and management experience and is likely to focus on
tight fiscal discipline as inflation remains a threat.

Shaikh, a former privatisation minister, will be put to the
test as Pakistan’s weak government attempts to energise a
struggling economy battered by a Taliban militant insurgency
and starved of foreign investment.

He must also try to strike a balance between policy demands
by the International Monetary Fund, which provides critical
financial support for Pakistan, and the government’s desire not
to alienate voters who could be hurt by those policies.

A senior government official said Shaikh has been offered
and accepted the post of adviser to the prime minister on
finance. [ID:nSGE62G0FT]

Shaikh will not be a full-fledged minister as he is not a
member of parliament, but he is expected to have the same level
of authority.

Shaikh’s background as a general partner in the growth
capital company New Silk Route Partners, which focuses on
private equity opportunities across Asia and the Middle East,
suggests he will pay close attention to market needs.

“He understands the local economy and also has the skills
to negotiate with the IMF and other bilateral and multilateral
donors,” said Asad Iqbal, managing director at Ismail Iqbal
Securities Ltd.

Having served as World Bank country head in Saudi Arabia,
Shaikh will be in tune with what Pakistan needs to do to secure
sustained international financial support — raising taxes,
taming inflation and generating more revenue to meet
expenditure.

But President Asif Ali Zardari will likely fight some tough
measures for fear they could trigger social unrest and make him
more unpopular. [ID:nRISKPK]
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(For full coverage of Pakistan click on [nAFPAK]
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Zardari is politically vulnerable, under pressure to hand
over some of his key powers to the prime minister. Some of his
closest aides, such as the interior and defence ministers,
could face prosecution under revived corruption charges.

In order for state finances to flow smoothly, Shaikh, 55,
also needs the support of Pakistan’s all-powerful military,
which consumes a major part of the state budget.

Respected former finance minister Shaukat Tarin’s
resignation announced last month raised speculation he was
caught between the demands of the IMF, whose assistance depends
on reforms, and the government.

Tarin negotiated an IMF emergency loan package of $7.6
billion in November 2008 to avert a balance of payments crisis.
The IMF increased the loan to $11.3 billion in July.

Shaikh served as privatisation and investment minister
during the turbulent nine-year rule of former president Pervez
Musharraf, a stint that may prepare him for uncertainty under
Zardari.

During that period, he concluded transactions worth $5
billion.

Investors may be comforted by his role as an adviser to
countries in mostly Asia, the Middle East, Latin America, and
his leadership of privatisation teams in telecommunications,
aviation, banking and manufacturing.

But there are plenty of challenges at home, including
chronic energy shortages and a fight between the government and
insurgents, which have eroded investor confidence.
(Additional reporting by Faisal Aziz and Sahar Ahmed in
KARACHI; Editing by Chris Allbritton and Jerry Norton)
(For full coverage of Pakistan and Afghanistan, click on
[ID:nAFPAK])

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(For more Reuters coverage of Afghanistan and Pakistan, see:
http://www.reuters.com/news/globalcoverage/afghanistanpakistan)

NEWSMAKER-Shaikh likely to push Pakistani fiscal discipline