Long term loss for Pakistan with Ishaq Dar’s economics

Islamabad, Pakistan:  

Harjap Singh, writing in Daily Sikh, said that Ishaq Dar is a qualified charted accountant but has got the responsibility of finance of the country. The author further said that Dar’s inability to understand fundamental realities and principles of economics will set up Pakistan for the next fiscal and Balance of Payments crisis.

Making a sarcastic comment on the army system and the governance, the author said that for some strange reason, in Pakistan, political leaders and the military prefer to hire chartered accountants and bankers over economists and appoint them as financial Czars. Be that as it may, as a chartered accountant, Dar’s expertise lies in cooking the books and fudging figures to window-dress the balance sheet and make it seem as if the financials are doing just fine. This is exactly what he has done in his earlier three avatars as finance minister of Pakistan.

Calling Dar a ‘voodoo economist’, author Singh said that he is seen as Pakistan’s economic miracle-man and even the new Finance Minister will manage to recover some Pakistani Rupee value against the dollar but his policies are neither tenable, not sustainable and certainly not affordable.

During the 2013-17 period, Dar, when he was the Finance Minister, spent around USD 20 billion in an attempt to prop up the rupee against the dollar. According to the author, for Dar-o-nomics (Dar’s economics) to work, it needs three things: one, there needs to be fiscal space available to the government; two, the government must exercise control over monetary authorities (State Bank of Pakistan); three, adequate foreign exchange reserves to play the markets and force a revaluation of the rupee.

Talking about his timeline as Finance minister, the author said that Ishq Dar left the economy in shambles. In late 1998, when the Pakistan economy was reeling under the effects of sanctions imposed after the nuclear tests, Dar was able to recover the value of the rupee against the dollar. But by the time the military coup took place in October 1999, the economy was on the brink of collapse.

Similarly, when Dar was replaced in 2017, he laid a foundation for the economic mess that followed and even continued. Imran Khan’s governance and abysmal handling of the economy had only made the matter worst but its foundations were also laid by Ishaq Dar.

Dar had also admitted that his most outstanding achievement as finance minister has been his ability to control the price of the dollar but his recipe of throwing the dollar to the market o prop up the rupee artificially is a disaster and will only make the situation worst for Pakistan, Daily Sikh reported.

Dar’s main achievement may seem to be attractive and that is what makes him a magician or a wizard but in reality, the revaluation of the rupee is not sustainable and will hold true only for the short and maybe the medium term – 1 to 3 years.

After this, the imbalance that comes with artificial price fixing forces Pakistan into yet another balance of payments crisis, with each succeeding crisis being much worse than the previous one.

Recently, the country has knocked on the doors of the International Monetary Fund for helping them from the pit of economic crisis but Dar’s announcement of reducing the petrol prices has raised the question of their relationship.

The SBP will have to temper Dar’s instructions with the demands of the IMF; the foreign exchange reserves are at a level that market intervention is extremely risky; on the fiscal front, there is virtually no space for any kind of profligacy to kick start the economy.

The upcoming election has forced the ruling Pakistan Muslim League Chief Nawaz Sharif and Prime Minister Shehbaz Sharif to do something drastic in the economic field to recoup its political capital. In other words, next year the government will have to throw fiscal responsibility to the winds and indulge in fiscal profligacy to provide relief to the people, create a feel-good, thing-getting-better environment and then use it to get elected, according to Daily Sikh.