KARACHI, Feb 24: Shaukat Aziz is almost certain to be named Pakistan’s finance minister for a second term if he wins a Senate election, in an appointment likely to be well-received by investors, keen to see progress on tax reforms and privatization.

Political pundits envisage no obstacles to Mr Shaukat’s appointment since the ruling PML(Q) has already nominated him as their representative from Punjab. Shaukat Aziz, who held the finance portfolio from 1999 to 2002 under a military-led government, must win the seat to get the finance portfolio.

The 51-year-old former Citibank executive joined a democratically-elected government as a finance adviser after the PML(Q) came to power last October.

Karachi’s financial markets will likely applaud a second term for Shaukat, who won plaudits for pulling the economy from the brink of bankruptcy three years ago to a state of stability and growth.

Sakeb Sherani, chief economist at the ABN Amro Bank in Islamabad, expects Shaukat Aziz to consolidate the economic gains achieved over the past three years as well as implement new reforms to strengthen civilian institutions and deregulate the economy.

Mr Sherani said reforming the Central Board of Revenue should be a key goal of Mr Shaukat’s fiscal regime as the country’s tax base remains narrow. Pakistan’s tax-to-GDP ratio has only expanded to 13% from 11.5% over the past three years, with little over two million Pakistanis paying income tax, a mere 1.4% of the population.

Arshad Arif, research head at brokerage KASB, said the market would be looking to Shaukat Aziz to speed up the privatization.

“He’s the only one who can built a political consensus for the successful implementation of the privatization programme,” said Mr Arif.

Shaukat Aziz heads the powerful board of the Cabinet Committee on Privatization, and his ministry is vital for solving fiscal issues related to companies on the list of privatization.

The planned sale of a major government stake in the Pakistan State Oil will be the country’s next disinvestment milestone.

Three years ago, Shaukat Aziz left Citibank as head of its private banking arm in New York for the top finance post in Pakistan at the direct request of military leader Gen Pervez Musharraf. At that time, few believed Shaukat would be an effective force in rebuilding Pakistan’s battered economy and mend ties with foreign donors under a military regime. Pakistan had never completed an IMF lending programme in the past. But he proved his detractors wrong.

Shaukat Aziz quickly launched wide-ranging economic reforms to strengthen and liberalize the economy, and in doing so restored ties with Bretton Wood institutions, which had kept Pakistan at arm’s length for years.

The government’s decision to back the US-led coalition in its war against terrorism after the Sept 11 attacks was also a factor in Pakistan’s economic recovery. That decision allowed the lifting of US-led sanctions, imposed after Pakistan’s 1998 nuclear tests, and also triggered a flood of foreign exchange remittances from Pakistanis working abroad.

Shaukat Aziz will oversee an economy that is expected by the analysts to slightly better the official target of 4.5% growth in the current fiscal year ending June 30, 2003. Growth in fiscal 2003-2004 is projected to be around 5%, according to some economists’ estimates.

Analysts have high hopes for Shaukat Aziz, despite the fragility of the current Jamali government. The creation of jobs is at the core of its economic policy.

ABN Amro’s Sherani said Shaukat Aziz must try to create an environment to sustain the country’s stronger export trend. These rose 19% to $6.1 billion in the first seven months of the current fiscal year, due largely to increased demand for textiles and improved access to the US and European markets.

“With the Iraq crisis brewing, we can’t allow shipment delays for Pakistani exporters as we saw after the war in Afghanistan when Pakistan was seen as a dangerous place and measures were needed for damage control,” he said.—Dow Jones Newswires

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