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Time for a new finance minister

Updated September 22, 2017

With Finance Minister Ishaq Dar facing legal challenges along with the Sharifs, it is becoming increasingly clear that he will have to tackle some difficult questions in the days to come.

Even though he has not spoken publicly in recent days, it is fair to surmise that the action taken by the National Accountability Bureau is seen by him as a politically motivated witch-hunt. That is, after all, how Maryam Nawaz has described the ongoing proceedings, and there is little reason to believe that Mr Dar disagrees with this view.

Whatever may be one’s take on the political developments, one thing has now become certain: Mr Dar needs to step down as finance minister. This is not only because he is now hobbled by legal entanglements. Even more importantly, it is high time Pakistan had a finance minister who is willing and able to acknowledge that the economy is in a downward spiral and that if urgent corrective action is not undertaken, the country will find itself in a crisis very soon.

Mr Dar has prided himself on his track record of restoring growth and the level of the foreign exchange reserves. To some extent, he is correct. But the positive aspects are limited, and Pakistan now needs a finance minister who is more forward-looking, rather than constantly harking back to a rapidly receding moment of respite.

Whatever turnaround in the fortunes of the economy that we have seen in the past four years is now falling apart, rapidly, as the current account deficit continues to climb, reserves decline, and the growth momentum is increasingly revealed to be highly patchy and thinly layered.

The structural bottlenecks that have constricted the economy remain in place; in any case, it was always a matter of time before reality caught up with rhetoric. Now that this is fast happening, the country must have a finance minister who is unfettered by political and legal entanglements of the sort that Mr Dar is caught in.

A finance minister is now required who comes in with a limited mandate. Whoever it is should begin his or her brief term by first acknowledging the downward spiral that the economy is in, and outline a credible action plan. That action plan should seek to shore up reserves, allow the exchange rate to adjust, address the growing circular debt in the power sector, and plug the fiscal framework to restrain the deficit.

In short, the country needs a finance minister who can embark on a policy course that leads gently towards macroeconomic adjustment, even if this comes at the cost of growth. It is now abundantly clear that Mr Dar is not that person, and he should step down from his position.

Published in Dawn, September 22nd, 2017