Pakistan Finance Minister Given Leave Amid Trial, Bond Sale

(Bloomberg) -- Pakistan’s Prime Minister Shahid Khaqan Abbasi granted his finance minister medical leave of absence and took charge of the ministry himself, as the government seeks to push through a crucial overseas bond sale amid political turmoil before elections next year.

Finance Minister Ishaq Dar may be on leave in London for as long as three months, Information Minister Marriyum Aurangzeb said by phone late Wednesday. The move ends some speculation on whether Dar would stay in the position and return to Pakistan after being charged with corruption. A court this month issued a non-bailable arrest warrant against Dar after he failed to turn up to proceedings.

Less than a year before national elections, South Asia’s second biggest economy is struggling with political and economic turmoil. Pakistan’s Supreme Court in July disqualified former Prime Minister Nawaz Sharif and ordered criminal proceedings against him and Dar after an investigation into their finances. Both have denied any wrong doing.

Finance ministry and central bank officials are currently holding a road show to sell dollar debt, in a bid to help finance a widening current account deficit and shore up dwindling foreign reserves. Although central bank Deputy Governor Jameel Ahmad this month played down concerns over the nation’s deteriorating external position, some analysts are speculating that Pakistan will need to seek International Monetary Fund support.

Opposition political parties were demanding Dar’s resignation saying he rarely attended meetings at the finance ministry since the July ruling. An anti-corruption court then indicted Dar in September. Sharif’s ousting followed last year’s leaks from a Panama law firm, which showed his children used offshore companies to purchase high-end properties in the U.K. capital.

Under Dar, Pakistan’s economic growth rate has risen to its highest in a decade when it completed a $6.6 billion IMF program last year after Sharif’s government came to power amid a balance-of-payments crisis in 2013. However, the nation’s external position has deteriorated as exports have waned and imports have risen on the back of China’s financing of more than $55 billion of infrastructure projects across the country.

The World Bank estimated in October that $17 billion of external financing -- or 5 percent to 6 percent of gross domestic product -- is needed in the current financial year through June for Pakistan to bridge its debt payments and current account deficit, which more than doubled to $14.4 billion in the year through September.

To meet those obligations and shore up shrinking reserves, Abbasi’s administration on Wednesday began holding international bond roadshows. Dar’s absence from the tour may impact appetite for Pakistan’s debt, as he was well regarded by international investors, said Ali Wahab, an investment banker at UAE-based Sharjah Islamic Bank who oversees a fixed income portfolio.

“A strong presence can help drive the price down,” he said. “Dar has been conducting investor meetings quite well in the past, exuding confidence while presenting and answering queries on the economic and political front.”

--With assistance from Faseeh Mangi

To contact the reporters on this story: Kamran Haider in Islamabad at khaider2@bloomberg.net, Khalid Qayum in Islamabad at kqayum@bloomberg.net.

To contact the editors responsible for this story: Chris Kay at ckay5@bloomberg.net, Jeanette Rodrigues

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