Who should be the finance minister?

Asking the wrong question is one of the most prominent qualities of the Pakistani public discourse. ‘Who should be the finance minister?’ is the wrong question. Whoever is made finance minister matters marginally. Whoever eventually gets made the finance minister is almost always the wrong answer. This isn’t because Pakistan is special or unique. It is because we are asking the wrong question.

The right questions are: ‘What is the finance minister’s job?’ and ‘What is required for the finance minister to be successful?’

In today’s column, I will try to present answers to these two questions.

Broadly, the finance minister’s job is to manage and steer the economy. This seems simple when framed this way. In fact, it is one of the most complex jobs on the planet. The finance minister must steer on the internal and the external fronts – and must do so whilst also ensuring that public policy as it relates to the economy (which relates to almost every aspect of governance) is broadly coherent. Let’s take each of these three aspects of the job separately: internal economic functions, external economic functions and policy coherence.

The internal part of the finance minister’s job first. The finance minister is responsible for the budget (which itself includes how to spend money as in expenditure, and more importantly how to earn money as in revenue). The finance minister is also responsible for managing the fiscal relationships with the provinces; this mostly involves trying to squeeze the provinces into spending less and less money.

Crucially, the finance minister is – whether State Bank autonomy champions like it or not – also responsible for domestic borrowing and repayment of money. From a policy perspective, this means that internally alone, the finance minister is responsible for all fiscal policy and most monetary policy. The array of organizations and government functions that this brings either directly under, or indirectly under the influence of the finance minister is staggering, from the SBP to the SECP to the auditor general and Competition Commission of Pakistan, and from the Energy Division to the Inter-Provincial Coordination Division and the Privatization Commission.

Traditionally, because the finance ministry is such a difficult assignment, it became a superministry. This superministry used to have five ‘divisions’ under it, each with its own secretary. Now, the five traditional functions or divisions at the finance ministry were finance itself, revenue, economic affairs, statistics and planning. Over the years, this shrunk to two. Planning became a separate ministry early during the 2013-2018 parliamentary tenure when the PML-N ruled the country.

The Statistics Division, originally attached to the Planning, Reform and Special Initiatives Division, was thereafter dissolved during the 2018-2023 parliamentary tenure when the PTI (and later the PDM) ruled the country. Economic Affairs varies from being a separate ministry to being placed back with the finance minister. The logic for this variance has never actually been the argument for whether the external part of the traditional finance minister role requires a separate ministry or not; the logic has always been the need to carve out a new ministry to award to party stalwarts. It should be emphasized that this is a system-wide failure, not a function of any individual failing.

The two divisions still under the finance minister are finance and revenue. But here too there is complexity. The Federal Board of Revenue isn’t exactly the Revenue Division – and over the years, bureaucrats have wavered between wanting a distinct secretary for revenue or wanting this role to be housed within the office of the chairman of the FBR. This variance leads to significant fragmentation and fracture of authority and policy clarity when it comes to the distinction between fiscal policy which is ostensibly the FBR’s role, and fiscal policy execution – which is not just the FBR’s job, but also the job of the various provincial boards of revenue, as well as the wider array of measures taken to secure debt (and pay for running the Islamic Republic of Pakistan).

There is the other matter of the logic of keeping the taxation function (internal revenue) connected to the customs function. All told, this headache ends up being the finance minister’s to resolve – but lacking adequate bandwidth, the way it is resolved means that it never really is.

The finance division itself has almost a dozen separate units, or wings, including budget, the debt management office, development, expenditure, inter-government finance (IGF), human resources, litigation and regulation, corporate finance and external finance. Each wing is led, for the most part, by deeply experienced and capable individuals – some with as many as two decades of progressively greater responsibility inside the ministry. But remember, these wings report to a single secretary, who then reports to the finance minister. If that sounds unwieldy, it’s because it is. The last of the wings I have listed within the finance division – external finance – is an interesting one. It leads us to the wider issue of the external aspect of the finance minister’s job.

On the external front, the finance minister has three key interfaces: bilateral partners and lenders (country to country), multilateral partners and lenders (the MDBs and the IFIs included), and the commercial players (banks and financial institutions as lenders, institutional investors in Pakistani bonds and paper, and other holders and managers of assets and wealth, globally).

To manage this, the finance minister has one additional secretary, but the government of Pakistan has a lot more ammunition. There is the Economic Affairs Division – whose job is to manage the relationship with bilateral and multilateral partners (think World Bank, Asian Development Bank, Asian Infrastructure Investment Bank, Islamic Development Bank, all the UN agencies and also think JICA, USAID, and FCDO). And of course, there is the Ministry of Foreign Affairs – where the Foreign Affairs Division manages Pakistan’s standing bilaterally and multilaterally. When it comes to external affairs, there is also the National Security Division and the array of military and intelligence organizations and bodies that influence policy.

This makes the job of the finance minister one that requires deep collaboration and trust across the cabinet and in Rawalpindi, but especially with whoever is running the Ministry of Foreign Affairs, and whoever happens to be assigned the role of Economic Affairs minister. It gets worse.

Finally, the finance minister is responsible for at least minimally coherent and robust public policy when it comes to the economy. This has two key aspects. The first is policy coherence within government, and the second is policy coherence with respect to stakeholders outside of government.

Within government, the finance minister needs to have at least some degree of influence and standing in at least three functions that are outside his or her direct domain: the first is trade and commerce, the second is investments and the third is technology. These three pillars of economic policy sit completely outside the finance ministry, but they are not only in need of the finance ministry themselves, they are also crucial for the finance minister to do her or his job well. One easy example is the issue of customs, which is central to the way trade policy (and especially imports) is managed.

Traditionally, finance ministers have ruled the day, leading to commerce ministers who feel powerless and foreign ministers who have no real influence in informing how Pakistan’s interests are affected by trade deficits or surpluses with various countries or regions.

Outside government, a finance minister needs to ensure coherence of economic policy by promoting and encouraging the private sector and growing the economy – and part of this requires that she or he protect government policy and decisions from the attrition and corrosion to the public interest caused by the meddling and influence of big money interest groups, such as APTMA, Pakistani banks, and real estate developers. It is the finance minister’s job to make doing business and making money in the country easier, whilst also making sure that these groups do not enjoy subsidies and freebies that hamstring Pakistan for generations.

In summary, the three key roles of a finance minister – internal economic functions, external economic functions, and policy coherence – demand a minister that can cover a lot of ground in a short period of time. No individual finance minister can succeed without a prime minister who offers her or him their complete trust, and without cabinet colleagues who see their own success in the success of the finance minister.

What should also be plainly clear to anyone with a pulse is that Pakistani government structures are now outdated by roughly half a century. How is any government that already struggles under the burden of political instability and the dominance of the military supposed to enact any kind of structural change? Worse, how can any finance minister ever succeed under these constraints?

The writer is an analyst and commentator.