ISHAQ Dar’s decision to finally embark on a longer term leave with his illness still leaves Pakistan to reconcile with his legacy as the country struggles to overcome its mounting economic illnesses on multiple frontiers.
For some, that legacy has come to be known as ‘Darnomics’ — a choice of policies including reckless ones associated with the former finance minister under the ruling structure that came to power in 2013.
In his high days, Dar’s writ in addition to presiding over the finance ministry ranged from backchannel negotiations with the MQM, the once formidable muscle force of Karachi, to the management of the shrine of Data Ganj Bukhsh, the patron saint of Lahore. It was therefore not surprising that he earned the nickname ‘Mr Deputy Prime Minister’ with the reputation of being second only to the top figure.
Recklessness was the order of the day under Dar.
That Pakistan has a burgeoning population and widespread poverty, and is failing to tackle key elements of macro-economic indicators, stood in sharp contrast to the claims of ‘all is well’, repeated frequently by Dar.
Under his tenure, Pakistan became struck with many contradictions. That fancy buses plying on elevated concrete platforms were seen as the perfect answer to traffic congestion in large urban areas while practically nothing changed the fate of critical areas like overburdened and poorly run government hospitals in need of a complete revamp. Such sharp contradictions were repeated in other areas such as fancy development projects with lots of concrete standing side by side with dismally run government schools.
The model led by Dar’s brand of economics ironically became a powerful reminder of the disparities highlighted by South America’s Hacienda model of the 1970s and 1980s, so well discussed by some of that region’s best known economists. The model essentially visualised a well-performing large agricultural estate, a hacienda equipped with helipads where the elite flew in and out, travelling over largely ignored but vast tracts with crippling poverty all around. And the Latin American debt crisis which followed became an eye opener for countries like Pakistan inclined to spend recklessly.
In the era of Darnomics, a similar fate has descended upon Pakistan. One evidence of the divide between the rich and the poor can be witnessed across some of Pakistan’s most popular supermarkets, stocked with imports ranging from crockery, ice cream and canned foods to exotic fruits — items of little interest to middle-class or low-income Pakistanis. Outside such sites stood line ups of expensive imported luxury sedans — a far cry from the Suzuki ‘Mehran’, the cheapest vehicle on that local market. Such extravagance only added to Pakistan’s ballooning trade deficit.
Such consumerism could have been acceptable if it was also affordable. Tragically, the soaring current account deficit peaking to a historical high during the last fiscal year along with evidence of crashing exports and mounting imports all spelt disaster.
With Pakistan’s industry suffering from multiple ailments ranging from energy shortages to the consequences of a much-publicised failure to devalue the rupee, competitiveness in international markets suffered badly. Meanwhile, Pakistan’s agriculture sector which directly or indirectly serves up to 60 per cent of the population, has also suffered in this period notwithstanding the official claims of a farmer-friendly government in Islamabad.
Beneath a wider canvas where the economy has simply become lethargic, two sub-legacies of ‘Darnomics’ suggest recklessness in policies with few precedents from recent memory. First, a widely dilapidated tax collection machinery in need of a comprehensive overhaul received little push towards a long overdue reform. This year, the government has so far thrice extended the date for filing of tax returns, buckling under pressure from one lobby after another. In a country with widespread evasion, the message is just one — that the state can do little to force a large number of tax evaders to finally pay their dues.
Second, Pakistan’s almost decade-long energy crisis may have recently shown some signs of being tackled with the widely despised hours of load-shedding beginning to be trimmed. Yet, it’s too early to tell if this is engineered to show improved performance before elections or evidence of a permanent change. More importantly, the circular debt of the power sector now well exceeds the Rs500 billion under the same head in 2013 which suggests another policy failure. The earlier debt was paid in a one-time swoop by Dar amid much fanfare to clear the deck, raising hopes of a new reform plan for the power sector about to be introduced.
In this dismal background, Islamabad’s finance-related babus are anxiously looking to market Pakistan’s upcoming international bonds for up to $2bn or more to tide over upcoming foreign exchange payments in the coming months. But is more debt worth celebrating? That question will hardly figure among Islamabad’s ruling class unless the ‘Darnomics’ practised since 2013 is erased.
The writer is an Islamabad-based journalist.
Published in Dawn, November 27th, 2017