ISHAQ Dar is back; so are his signature policies. The reduction of a little over 5pc in fuel prices announced by him at his maiden presser is his first major act days after he took charge of the country’s treasury. The cut in petrol prices will have little impact on galloping inflation but it will decrease some pain at the pump and produce a ‘feel-good’ effect that the PML-N desperately needs to dilute the political noise being created by the opposition PTI. That is precisely why Mr Dar has been brought back and his predecessor Miftah Ismail sent home despite the hard work he had put in to get the IMF programme back on the rails. The drop in average global oil prices during the last fortnight did provide the new finance minister some room to slash the politically more explosive petrol prices but he was able to give much bigger ‘relief’ to consumers by reducing PDL on petrol by Rs5 a litre. As luck would have it, he also found space to recover some of the PDL losses on petrol by raising the levy on diesel. Apparently, the IMF did not object to this in view of the surging food inflation in the aftermath of the devastating floods.
Mr Dar is expected to attend the annual meeting of the IMF to seek some relaxation in its harsh loan programme conditions in the wake of the massive losses caused by the deluge which have aggravated the economic crisis facing the country. Considering the recent statements of senior IMF officials, he will be able to secure significant concessions and additional multilateral dollars. It is at that point when, many fear, he might start applying his interventionist policies to shore up the currency’s value and slash interest rates to reduce inflation and create an illusion of growth ahead of the next elections. That may help the ruling PML-N improve its political stock among the voters but it will ultimately prove disastrous for Pakistan’s economy.
Published in Dawn, October 2nd, 2022