Has Ishaq Dar failed as a finance minister?

Pakistan’s Finance Minister, Ishaq Dar, has been facing heavy criticism for his handling of the country’s economy. Many experts argue that his policies have led to a decline in economic growth and an increase in inflation. The devaluation of the Pakistani rupee and the widening trade deficit are also causes for concern. Additionally, there have been allegations of corruption and mismanagement within the Ministry of Finance under Dar’s leadership. These issues have raised serious doubts about Dar’s ability to effectively manage the economy and have led to calls for his resignation. This week, Bol News asks four leading experts whether Ishaq Dar failed as a finance minister or not.

Abid Hasan

Former operations adviser at the World Bank

It’s a very precarious situation, and it has become worse due to the current political situation and the recent policies and exchange rates. There is no doubt that we are short of foreign currencies, but the current policy makers are managing the foreign currency shortages in the worst possible manner. If you ask the economists, the exchange rates are market-determined because we do not have administrative control.

The problems are not solved; they have been made worse by our ministers. Had I been the prime minister, I would never have gone to Geneva and begged for the money. We must cut government expenditures. And the sooner we move to market-based exchange rates, the better Pakistan’s economic situation will be. Of course, nobody would say that this will not cause inflation, and that is where the art of policymaking will come in, where they will figure out a way of moderating the impact of inflation, especially on people with lower incomes. Indirect taxation is worse for the people. For the last 50 to 60 years, we have built an economic structure that is globally incomparable.

We built that structure, especially because of our geostrategic location, and everybody was able and willing to help us. Our bloated import bills were being paid in dollars. We could never afford that kind of import bill. Sometimes the Americans would pay, and other times the Chinese would pay along with others.

Now this whole economic structure is kind of crashing. People predicted this crash five months ago. We’ve been surviving on subsidies for 30 to 40 years. The bottom line is that we have to survive this inflation, and the people will have to adjust to it, although the profit margins of the exporters are booming. The major complainants are the people in the textile industry. They are not able to make money because of the increase in the cost of production. Hence, things will get worse before they get better, and Pakistan cannot avoid this situation.

Abid Suleri

Social policy analyst

I would say that it’s too early to say that Ishaq Dar has failed as a finance minister because things are still unfolding. We must compare the performances of both the governments and the personalities, and we must also keep in mind the external factors, their work, and their standing in the respective parties and the cabinet.

For example, when I look at the Pakistan Tehreek-i-Insaf (PTI), the most successful finance minister there was Shaukat Tareen, and the reason was that he had the complete backing of the prime minister as well as a say in the cabinet. If we talk about Dar, he has a persona in the cabinet, and if he wants to take a decision, no one would veto him or criticise him within the party, so that sort of decision-making power is very important in Pakistan. Whether he is successful or a failure totally depends on the events that are unfolding, mainly with the IMF. How well and on what terms and conditions are they negotiating with them?

So Pakistan is on the verge of defaulting not because of its economic strength, but because of its equally good relations with China, Saudi Arabia, and America as far as the IMF is concerned, and any government or any finance minister who would be able to maintain this equally good relationship with the three previously mentioned countries would be considered successful because he would be able to get the support of them.

Any disturbance in these relationships by the government, foreign office, or ministry of Pakistan would cause economic problems for the country. If we talk about all the other external factors, they are constant. Hence, the success or failure of Pakistan’s economy only depends upon its relationship with these countries. The major decision that needs to be taken right now is bringing back the IMF.

Asif Qureshi

Chairman, Optimus Capital Management

Well, Ishaq Dar’s performance has certainly not been great, but he entered during very challenging times. However, he is not actually very pro-reform and pro-market. He is the person who believes in getting things done just by pushing his way through.

That is the major problem. When you are looking after the economy of a country like Pakistan, you need to believe in certain fundamental principles of economics, but unfortunately, he does not seem to agree with those principles. He does things in a certain way, which may have worked in the past but is not working this time. We are facing a large fiscal account deficit, so we needed to be more pro-reform, and we should have encouraged international investors, but he seems to be doing things his own way. His fundamental approach to resolving the economic crisis was not right. That was only possible if you had an easy flow of capital.

However, if I compare Miftah Ismail with Dar, Miftah would always be the better finance minister. If you would speak to anyone who has a better understanding of the economy, he or she would say that Miftah’s approach and his policies were far better than Dar’s. Dar set the bar very high in front of everyone.

He presented himself as some sort of magician or wizard who can make things right with his magic wand, but he was not able to live up to the expectations that he has built for himself amongst the public. Perhaps this is why he isn’t appearing as frequently in mainstream media as he used to. I think Dar was not able to come out of his past achievements in 1998 and 2013. He needed to understand that the conditions back then were entirely different than they are now. He just looked at the outcome, not the situation in which he made those achievements.

Kaiser Bengali

Economist

It doesn’t matter who the finance minister is or how good or bad he or she is. The major problems are structural, and unless and until these problems are resolved, no finance minister will be able to make any difference. Anyone in Dar’s place could have failed as a finance minister.

There are two structural changes that are needed: the budget deficit has to be brought down, and the trade deficit has to be brought down. This has to be done by reducing government expenditures by 1/3rd and reducing imports by 1/3rd. If we compare Miftah Ismail with Dar, Ismail had a very short term of reference to avoid default.

He did not resolve any of the economic issues. His job was to get the IMF on board, and for that he was required to rig petroleum and electricity prices.

His policies burdened the common man. He was asked to avoid default, and he did it. But the method he implied was harmful to the economy and to the people. Hence, he was as much of a failure as Dar.

But the failure is not due to personal shortcomings; it is due to structural problems that the government did not address. When the government expenditure is more than the price revenue, the imports are twice as high as the exports, and all along you have been financed through foreign loans, then the economy is going to suffer.

How long can you live on loans? All the luxuries that we enjoy are all due to foreign loans; not a single penny is our own money.

The only government policy followed by Dar and Ismail has always been to get more loans. If anyone says that we are very happy that we got loans, there’s nothing to be happy about. You are only deepening the crisis.