Dar returns to fix economy

Mehtab Haider & Muhammad Saleh Zaafir
Tuesday, Sep 27, 2022

ISLAMABAD: Former finance minister and Pakistan Muslim League-Nawaz (PMLN) senior leader Ishaq Dar on Monday returned to Pakistan along with Prime Minister Shehbaz Sharif.

Dar will assume the charge of the Ministry of Finance today after a pause of almost seven years. Luckily, at a time when he is about to become minister for finance after being sworn in as a senator, the prices of POL products in the international market have started declining. So Dar will be able to find out fiscal space for reducing POL prices in the domestic market.

Now the incoming finance minister will have to face the challenge of mustering up support of international donors to generate dollar inflows. The raising of dollar inflows up to the desired mark will be a prerequisite to stabilise the exchange rate for which Dar is known as twice in his carrier, he managed the exchange rate very well.

When Pakistan became a nuclear power in 1998 and faced a difficult economic scenario, he had managed the exchange rate despite all odds. Second time in 2013-18, when he assumed the reins of Finance Ministry, Pakistan was facing a crunch. He went to the IMF programme but kept the rupee stable.

Now the foreign currency reserves held by the SBP are on decline despite the revival of the IMF programme. First of all, the government will have to ensure dollar inflows on an immediate basis for giving a clear message to speculators that they would not succeed in manoeuvring the market and if they do such activities, they would have to face administrative action as well as financial losses.

It can only be done by raising the capacity of the State Bank of Pakistan to intervene in market for avoiding a disorderly movement. Dar possesses ability to use the law against bankers and their abettors to teach them a good lesson, but first he will have to generate dollar inflows both as debt as well as non-debt creating inflows. The inter-bank movement of rupee has showed positive signs as it strengthened by Rs2.63 and closed at Rs237.01 against dollar on Monday.

When the exchange rate comes under control, his second challenge would be taming inflationary pressures which are projected to remain hovering around 23 to 25 per cent on average. All this requires political stability. If political stability remains a distant task, his efforts might prove futile this time.

The outgoing minister for Finance, Miftah Ismail, is not going to assume any official position after tendering his resignation from the ministerial post. When contacted, Miftah on Monday said he was not going to get any government slot. He said he would reach Pakistan and then tender his resignation.

Earlier, talking to the media after landing at Nur Khan Airbase Chaklala, Dar vowed to take the country out of economic crisis. “We will take Pakistan out of the economic mess as it has been done in 1999 and 2013-14,” Ishaq Dar said.

Ishaq Dar, left the country five years ago. He is expected to take oath as Senator today (Tuesday). Senator Dar said he reached Pakistan on the instructions of the party leader, Nawaz Sharif and Prime Minister Shahbaz Sharif. Talking to the media in London, Dar had said, “With the grace of Allah Almighty, I am returning to the same office from which I came here for medical treatment”.