ISLMABAD - At last the Prime Minister Mir Hazar Khan Khoso Monday brought in two economic wizards to steer out the fragile economy from existing morass.

The caretaker Prime Minister Mir Hazar Khan Khoso, has appointed Dr Shahid Amjad Chaudhary as Adviser Finance Incharge Ministry of Finance, after three weeks of assuming charge. Dr Shahid Amjad Chaudhary is the Rector of Lahore School of Economics and also Professor of Economics. He teaches Public Finance and Pakistan Economic Policies at the Lahore School. He was Deputy Chairman of the Pakistan Planning Commission from July 2000 to July 2003.

In another important development, Prime Minister has appointed Dr Waqar Masood as Secretary Finance replacing Nasir Khosa who has been appointed as Secretary Textile. The caretaker government has almost brought new economic team as it already appointed Ansar Javed as chairman FBR few days back after Islamabad High Court’s decision to terminate Ali Arshad Hakeem as chairman FBR.

The new economic team would face several challenges in its short run tenure to steer out the fragile economy from existing morass. Pakistan’s foreign exchange reserves are depleting sharply and budget deficit is increasing due to the untargeted power subsidy, decline in revenue collection. . The caretaker government is supposed to take crucial economic decisions like approaching IMF to stabilise the economic situation in its short run tenure of less then two months.

Similarly, the new economic team would play vital role in preparing budget for next financial year 2012-13. Although the upcoming elected government would be responsible to handle issues related to the annual budget, pre-budget conditions seem hostile and will definitely have to be faced by the caretakers.

Similarly, Pakistan’s economic team would hold key talks with United States of America, International Monetary Fund and World Bank from next week at the sideline annual spring meeting of IMF/World Bank scheduled from April 17 to 22 in Washington. Pakistan might initiate technical talks with IMF for $5 to 6 billion bailout package. 

The new economic team would face unstable position of foreign exchange reserves, which stand to cover just around two months worth of import bills. The country’s foreign exchange reserves held by State Bank of Pakistan stood at $6.697 billion that would decline to below $6 billion by the end of June 30, as country would repay almost $1 billion to IMF in remaining three months (April-March) of ongoing fiscal year.

The economic team would have to control the soaring budget deficit, as it might go beyond 8 per cent of the GDP during the ongoing financial year 2012-13 due to untargeted power subsidy and decline in revenue collection. The government would have to take steps to generate additional revenue in last quarter (April-June) to reach the revised tax collection target.

Similarly, the economic team would problem to control the power outages in the country. The finance ministry provided Rs 278 billion in nine months (July-March) of the ongoing financial year 2012-13 against the revised allocation of Rs 291 billion for the entire fiscal year and additional subsidy to the power sector has adversely impacted the fiscal deficit which is expected to exceed 8 percent in the current fiscal year.