IN yet another interesting twist in the ongoing political soap opera, Ishaq Dar is back, picking up from where he left off some five years ago. The so-called financial wizard promises to fix everything that has gone wrong with the country’s economy. What is described as ‘Daronomics’ is supposed to bring down the dollar and contain the spiralling inflation. Just wait for the magic to start working.
In fact, the return of Dar as the country’s next finance minister and the unceremonious exit of Miftah Ismail have not come as a surprise. It was evident that a Karachi businessman with a doctorate in economics was there just as a stopgap arrangement for getting some hard tasks done.
Miftah Ismail successfully negotiated an extremely tough deal with the IMF. But once the tranche was received, he was deemed dispensable. The former finance minister will now be a convenient scapegoat for the government’s failure to stabilise the economy and stem the rot.
Dar has been one of the harshest critics of the steps taken by the former finance minister who secured the bailout package needed to prevent an imminent default. Sitting in London, Dar did everything he could to undermine his predecessor. The ground was already prepared for his return.
More importantly, being a close confidant and more or less a member of the Sharif family, Dar has the blessings of former prime minister Nawaz Sharif. Within six months of its formation, the government will now have its second finance minister.
The new finance minister has apparently been tasked to regain his party’s lost ‘political capital’. But can Dar, despite his self-proclaimed ‘wizardry’, turn around an economy in a state of free fall?
Sitting in London, Dar did everything he could to undermine the previous finance minister.
His previous record as finance minister in Nawaz Sharif’s second and third governments has not been without blemish. He was a de facto deputy prime minister in Sharif’s last government. Besides his main responsibility of dealing with the economy, he also headed dozens of government committees dealing with issues ranging from the economy and politics to legal matters.
During his previous term, his controversial efforts to control the exchange rate by pumping dollars into the market worsened Pakistan’s current account deficit problem and were also the reason for the country going back to the IMF for a bailout in 2019.
It may not be possible for Dar to use the same prescription to contain the free fall of the rupee today, with foreign exchange reserves already in a precarious situation.
A more serious challenge for him would be to bring down the runaway inflation that is being driven by both internal and external factors. A weak government with limited political control and little fiscal space is hardly in a position to undertake any major reforms. Being in an IMF programme with stringent conditionalities will make it harder for the incoming finance minister to deliver on his promises.
Read: Dar’s return
Dar has also been known for his tendency to control regulatory bodies including the State Bank. But with a new rule protecting the autonomy of the State Bank (a part of IMF conditionalities), it may be extremely difficult for him to manipulate the exchange rate as he did in the past. The challenges for the returning ‘economic czar’ are extremely daunting in the current economic and political milieu. His pledge to turn around a sick economy within a few months — before the next elections — will be severely tested.
Dar’s return means more than just a change of guard at the finance ministry. Unlike Miftah Ismail, he has the backing of not only PML-N supremo Nawaz Sharif but also other senior party leaders. That may change the power balance within the government.
His return to the most powerful cabinet position would certainly strengthen the former prime minister’s control over the government’s policy-framing process on important national issues.
As in the previous PML-N government, this time too he might act as deputy prime minister, taking his direction from Nawaz Sharif. That could make Prime Minister Shehbaz Sharif extremely uncomfortable, raising serious questions about who wields the real authority in guiding the policies of the PML-N-led government.
It is evident that all major decisions are taken in London rather than Islamabad. Hence it was not surprising that the decision regarding Dar’s appointment was apparently made in the meeting between the Sharif brothers in London recently.
According to media reports, the meeting, which was also attended by some cabinet ministers and other Sharif family members, discussed the party’s future course of action.
The latest audio leaks saga shows that even minor decisions, for example, which ‘resigning’ PTI MNA is to be de-seated, requires Nawaz Sharif’s approval. The very optics of Shehbaz Sharif making two trips to London within days and consulting his elder brother and other family members is disconcerting, and also raises eyebrows because the prime minister was out of the country although tens of millions of people at home were suffering the consequences of one of the worst natural calamities to have struck Pakistan.
How can we expect the international community to respond to our appeal for support to deal with the calamity when the government doesn’t seem serious about fully mobilising its own resources? It makes it much harder for the ruling party and the government to regain their ‘lost political capital’.
Dar is not likely to perform any miracles to salvage a deteriorating economy. The existing polarised political environment and growing opposition pressure have further complicated the situation.
Yet the PDM government doesn’t seem to have any understating of the gravity of the crisis.
A massive cabinet is not expected to deliver on key challenges confronting the country. Many of the ministers, advisers and special assistants do not even have a portfolio or have not been assigned any responsibility. They are a huge burden on the exchequer during a serious financial crunch.
The return of Dar is not going to improve this basic problem of governance.
The writer is an author and journalist.
Published in Dawn, September 28th, 2022