KARACHI: With an ‘I-told-you-so’ expression writ large on his face, former finance minister Miftah Ismail railed against his successor Ishaq Dar once again for “giving a cold shoulder” to the International Monetary Fund (IMF), which caused “a big loss” to the country.

In remarks made on two separate occasions — an early morning interview on Geo News and a subsequent panel discussion at the Institute of Business Administration — on Thursday, Mr Ismail congratulated the government for letting the dollar float freely in the market, something that he had been advocating for a long time.

“Going against the free-float reduced exports and remittances by 10pc each. It offended the IMF and resulted in the Gulf banks not rolling over our loans. It’s been disastrous. We would’ve been better off had we not taken that route,” he told reporters after the IBA event.

Mr Ismail lamented that politics had become divorced from economic realities — a fact that manifested itself in no-confidence motions and musical chairs for the position of chief minister while the country inched closer to default.

Former finance minister still sees ‘some probability’ of sovereign default

“Dar sahib, after taking the reins, thought he would fix the economy without the IMF or by scaring the lender to accept Pakistan’s demands, as he had been openly opposing the IMF conditions. He made an attempt and as a result, Pakistan suffered a big loss,” he told the hosts of Geo Pakistan on Thursday morning.

Mr Ismail said it was encouraging to note, however, that the government had consented to IMF’s terms, which could pave the way for economic improvement.

He recalled that Pakistan’s default risk rose to “unacceptably high” levels when former premier Imran Khan allegedly violated the IMF agreement, adding that the PML-N government — during his tenure as the finance minister — took measures that minimised the risk of bankruptcy.

The former minister said he had decided against taking part in elections, saying that in his view, “Pakistan’s interest is more important than my personal political career.”Later, taking part in the panel discussion Mr Ismail said there’s still “some probability” of Pakistan declaring sovereign default — a rare occurrence in which a country fails to pay its dollar-denominated loans. Inflation spikes as imports come to a halt and foreign capital becomes completely inaccessible. “The probability of default has gone up in the last few months,” he added.

The sudden upward adjustment in the exchange rate is meant to fulfil a precondition for the revival of the IMF loan programme. “Fixing the exchange rate was madness,” he said. A large part of Mr Ismail’s talk consisted of the points he’s made repeatedly in lectures and podcasts since leaving office last September. Video clips showing Mr Ismail speaking tearfully about the state of poverty have gone viral. But many people — like one IBA teacher who took part in the Q&A session — fail to reconcile Mr Ismail’s pro-poor rhetoric with his “neo-liberal” views on issues like privatisation and exchange rate management.

After all, the much-vaunted Indian Institutes of Technology that Mr Ismail holds up as real engines of IT exports for the neighboring country are government-funded, the faculty member noted.

“I’m a firm free-market believer. Social justice and free-market principles aren’t mutually exclusive,” Mr Ismail said, adding that the IMF doesn’t stop governments from paying targeted subsidies.

Published in Dawn, January 27th, 2023

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