By NIHAL AKHTAR
Sep 20 - 26, 2004
The newly elected Prime Minister of Pakistan Shaukat Aziz has a trail of successes as banker and economic reformer. Son of a former Radio Pakistan Engineer, Shaukat grew up in Karachi and joined Citibank in Karachi after doing MBA from IBA at the age of 21. At the age of 24, he was appointed as country manager for Citibank in Jordan. After serving in Athens as Citibank's regional head, he was posted to New York. In 1982, he arrived in Kuala Lumpur, Malaysia, as Citibank chief country officer. And in 1984, he was appointed as Chief of Saudi American Bank, an affiliate of Citibank in Saudi Arabia.
In Saudi Arabia, he had developed close relationship with the member of the Saudi royal family specially with Prince Al-Waleed bin Talal of Saudi Arabia, the world's fifth-richest man. And persuaded Prince Al-Waheed, to bail out Citibank by injecting around US$600 million into Citicorp.
In early 1996 Shaukat moved to New York to become Citibank's chief planning officer. In 1997, he moved to head Citibank's global private bank, the third-largest private bank in the world. By the time, Prvez Musharraf summoned Shaukat to Islamabad and asked him whether he would take up the challenge of restoration of Pakistan's economy, the country was not only under economic sanctions but in a bad shape, as in 1999 Pakistan's balance-of-payments position was unstable. It had only foreign reserves to cover less than two weeks of imports and a foreign debt at US$38 billion, of which nearly a third was short-term debt. Pakistan at that time was on the verge of defaulting on some of its foreign debt.
The major tasks in front of Shaukat Aziz were to tackle the precarious balance-of-payments problem, Pakistan's debts, burgeoning budget deficit, attract long-term investments, build infrastructure and put in place a system that will allow the economy to grow at a sustainable 6% to 7% a year for the next five to 10 years and to tackle issues like poverty.
Shaukat had tackled all the obstacles one by one, first and foremost efforts was made to increase foreign reserves which now stand over US$ 12 billion, which is almost 12 months or 50 weeks of imports. Pakistan's total foreign debts are now down to just over US$ 34.5 billion, almost all the short-term debt had been repaid and recently prepaid Asian Development Bank 14 loans amounting to US$1.17 billion, an expensive debt which was due for payment between 2009 and 2019. The pre-payment would save Pakistan some US$300 million in future interest payments since the loans carried high interest rates of 8% to 11%. The well-in-time management will bring the total stock of foreign liabilities down to around US$33 billion.
The fiscal deficit has came down from 8% to just 4% this year and planning is underway to bring the deficit down further to a more manageable 2% to 30% of the GDP.
Inflation brought down from double digits to about 2%. Pakistan has also undertaken structural reforms and a massive privatization programmes and focused on putting proper drives of growth in place. The results have been nothing short of spectacular. The Karachi Stock Exchange Index is up 300% and low interest rates and deregulation have freed up money for housing finance that is behind the housing boom.
Moreover, the prudent policies have lifted exports to the tune of US$12 billion a year. Shaukat Aziz and Pakistan's central bank chief Ishrat Hussain, traveled to global financial capitals as part of a road show to sell US$500 million worth of bonds, Pakistan's first in nearly seven years. The bond issue was a roaring success, attracting nearly US$2 billion.
Pakistan is now set to move into the second phase of structural reforms. Analysts expect the country to raise US$2 billion from privatization this year and a similar amount next year.
The GDP per capita rises to US$600 during the last fiscal year ending June but the aim is to get it to above the US$1,000 level. With the measures already undertaken by the Prime Minister it is expected that 6% growth can be achieved for the next year because the manufacturing sector is growing, global textile quotas are on the way out and with the buoyant property market. We have the construction sector booming. But for that, we need to spend more on education, training, and improving our infrastructure.
By just looking the past, one can easily say that economy of Pakistan has been put to the right track and same could be said for other sectors after Shaukat's taking over as Prime Minister of Pakistan.