FM 101: Pakistan’s next finance minister needs a vision, not just experience

Will the next finance minister dare to innovate and redefine Pakistan's economic strategy or are they going to find themselves stuck in the same old loop?
Published March 1, 2024

My grandfather used to have a yellowed old sign hanging above his office desk that read:

Weak minds talk about people;

Average minds talk about events;

Great minds talk about ideas …

As Islamabad buzzes again with the talk of who the next finance minister will be, my thoughts keep returning to that sign. Rumour has it that Ishaq Dar is the front runner, that Dr Shamshad Akhtar remains in the running, and that various bankers and second-string politicians are dark horses.

A candidate’s closeness to a party leader gets talked up. Another is said to have the trust of Q block. A third is apparently close to the so-called establishment. Bankers’ credentials and job titles are exaggerated.

At best, three questions are posed: Will the candidate be able to work with the International Monetary Fund (IMF)? Will they be deemed acceptable by foreign powers? And will they acknowledge the future role of the military-dominated Special Investment Facilitation Council (SIFC)?

We know the candidates, not their ideas

In all this chatter about people, there is no discussion about their ideas. We specifically fail to inquire: what distinct policy strategies do these people propose to fix the mess we’re in?

Since answers aren’t forthcoming, let’s ask a different question: what would an ideal Pakistani finance minister do?

As always, our next finance minister will realise that we owe more money than we have. It’s the same problem our last minister and the ones before him faced. So, our minister will have to enter into negotiations with the IMF and beseech countries on friendly terms with Pakistan for more loans and rollovers.

There is little agency in the matter; the only difference between the candidates is that some may do it quietly and promptly, while others would do it loudly and drag their feet; some might receive a warm hug at foreign airports, and others a handshake and a nod before getting down to business. They would all have to make more or less the same requests and would receive similar deals because they’d all represent exactly the same problems back home.

IMF’s blueprint for Pakistan

Bilateral negotiations are hidden from public view, yet the IMF’s demands have been openly documented for decades. In short, the Fund wants us to spend less and tax more (preferably from non-filers) to create space to pay our debt; to maintain a market-determined exchange rate so we don’t import more than we export; to keep interest rates higher than inflation, so we don’t prioritise consumption over investments; and to begin addressing long-standing issues such as our energy and State-Owned Enterprise (SOE) losses.

This is an eminently rational agenda. If anything, it falls short in its recommendations — particularly overlooking key determinants of long-term productivity such as education, trade competitiveness, and governance — areas where a finance minister should at least play a role in planning.

It is in following the Fund’s advice that we might think our ministerial candidates will start diverging. Our candidates clearly differ in their willingness to pursue even this minimal agenda. Some want the funds but openly resist even fundamental reforms. Others acknowledge the validity of the prescription, at least in private if not in public. But in reality, how differently would they act?

About time we embrace change

When change finally comes — when we start going after non-filers and power thieves, withdraw uneven tax exemptions and subsidies, shutter loss-making public companies, and reduce loans from banks and anyone else who’ll lend to us — that change will not be ordered from a finance minister’s desk. It will be announced by a prime minister who risks their political capital for the country, and with the support of the country’s institutions.

From voices in the finance ministry to the political, business, media and military elite, there is a resistance to change and experimentation that has proven remarkably unwavering even as the country has suffered an acute and sustained economic crisis.

“This is no time to experiment,” I have heard every year through 20 years of sustained decline. We need a steady hand. Experience. Whatever we do, we have to keep the dollar and policy rates as low as we can. Pakistan cannot be run like other countries we are told, or — as it appears — by logic.

And so we stick with the same people making the same decisions that we have ample evidence have failed us previously. It continues to elude us, for example, that short-term efforts to keep the dollar cheap are a major reason the dollar has become so expensive in the long run.

It has been more than a decade since the idea of a Charter of Economy was first floated; six years since a new government went to the IMF in crisis; two years since another government went to the IMF again; and eight months since the last loan helped Pakistan narrowly avert default, yet again.

We have, in this time, resolved to try nothing new.

It really isn’t that complicated

A good finance minister candidate would be able to articulate by now what has gone wrong; would have public views about which redundant ministries or SOEs we need to shutter first and which untaxed sectors we need to raise revenues from this year. They would also have ideas about the seismic shifts in our industrial, banking, and corporate terrain that must come with reform.

The right person would present a five-year roadmap, be honest with us about the pain that inevitably looms, but reassure us by showing us how Pakistan can do things better from now on.

Instead, the conversation has reduced to whether the minister will tighten the budget this year, hike interest rates this quarter, raise energy bills this summer, and suppress the dollar for now. And so, some of our candidates are polishing personal brands and inviting us to join their cults. Trust him, not her, and vice versa. The conversation ends there.

Until the talk about finance and the economy shifts from people to ideas, we are unlikely to see better days.

Header image created with AI