Dar rubbishes ‘default mantra’ but admits economic situation is dire

Published December 29, 2022
Finance Minister Ishaq Dar addresses a ceremony to mark the first listing of the developmental Real Estate Investment Trust (REIT) on the Pakistan Stock Exchange (PSX) on Wednesday. — PID photo
Finance Minister Ishaq Dar addresses a ceremony to mark the first listing of the developmental Real Estate Investment Trust (REIT) on the Pakistan Stock Exchange (PSX) on Wednesday. — PID photo

KARACHI: Finance Minister Ishaq Dar assured investors on Wednesday that “there’s no way Pakistan is going to default”, though he agreed that all was not well with the economy.

“We’re in a tight position. We don’t have $24bn in foreign exchange reserves that our (last) government left in 2016. But that’s not my fault. It’s the system’s fault,” he told investors at a ceremony to mark the listing of Pakistan’s first developmental real estate investment trust scheme on the stock exchange.

Mr Dar also assailed “pseudo-intellectuals” for raising the spectre of sovereign default even though the country repaid its $1 billion Islamic bond before maturity early this month.

“There’s no way Pakistan is going to default,” he repeatedly declared in his largely backward-looking speech via video link.

‘Pseudo-intellectuals’ assailed for raising spectre of sovereign default

Mr Dar’s reference to pseudo-intellectuals appears to be a dig at his predecessor Dr Miftah Ismail, a PhD in economics, who has been vocal about the possibility of default in his newspaper columns and TV appearances since leaving office in September.

“We’re hurting the country over petty politics… we’re our own worst enemy,” he said.

Building on the generous praise by earlier speakers for his supposed financial wizardry, Mr Dar patted himself on the back for lifting Pakistan out of economic quagmires in 1998, 2008 and 2013.

Citing statistics on inflation, key interest rate, foreign direct investment and share market benchmark, he said the economy was in sound shape the last time he left office in 2017. He asked the business community to hold accountable the set of politicians that followed the last PML-N government in power.

The only time Pakistan completed an International Monetary Fund (IMF) loan programme was under the PML-N government, he said, while vowing to fulfil all IMF conditions this time as well.

Striking a populist tone, however, Mr Dar said Pakistan couldn’t be held “hostage” to the dictates of others. “We shouldn’t put more burden on people either if we can’t give them relief. We have delivered on our commitment on the petroleum development levy while reducing petroleum prices three times,” he said.

The external account is the biggest challenge and the government is trying to improve the situation, he said. “We’ve identified more external resources and inflows. We’ll be in a much better position with respect to the external account and reserves by the end of the fiscal year,” he said.

Referring to a notification issued by the central bank a day ago, the finance minister also took credit for lifting some of the import curbs on essential items.

“Our ultimate goal should be to avoid going to the multilaterals,” he said, adding that Pakistan should ideally be able to access funds through the international debt market.

In an ominous note, he said the key interest rate in Turkiye is just 9pc even though inflation is hovering around 60pc. Mr Dar is known to be a staunch supporter of keeping the interest rate low even in the midst of high inflation — an approach that runs counter to conventional economic wisdom.

Inflation in Pakistan is imported and linked to devaluation, he said, noting that the central bank and its interest rate–setting committee are “autonomous”.

Published in Dawn, December 29th, 2022

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