Pakistan’s new Finance Minister will find it hard to clear the financial mess

All eyes are on Pakistan’s new Finance Minister Ishaq Dar who completes a week in office.

Needless to say, his measures will be scrutinised with a fine-tooth comb as the country reels under surging inflation and currency devaluation. Dar, a chartered accountant by profession and a seasoned politician will be the sixth finance minister in about four years. Dar has been critical of his predecessor Miftah Ismail, who renegotiated with the International Monetary Fund (IMF) to revive a stalled economic package for the country. With his taking over, the Pakistani currency has strengthened somewhat but an analyst told India Narrative that the “old rule book” for economic management may not work in the new world order in the aftermath of the Covid 19 pandemic and the ongoing Russia-Ukraine war, which has further disrupted energy supplies

“The problems are well known but the solutions may not lie in the old rule book,” he said.

Even as Pakistan Prime Minister Shehbaz Sharif said that the former finance minister Ismail took up “one of the toughest jobs at the height of the economic crisis” the latter was often criticised by his own party members especially after the removal of fuel subsidy as prescribed by the IMF. Following the fuel price hike, inflation in August rose to 27.3 per cent—the highest since May 1975. In July, it was 24.9 per cent.

Pakistan’s local news organisation the Express Tribune said that this is the second time in the past one-and-a-half years when due to a change of the finance minister, the country’s economic policies will undergo drastic changes. PML-N supremo Nawaz Sharif also has not been comfortable with Ismail’s policies. More importantly, the newspaper added that “this also caused some frictions between Nawaz Sharif and his younger brother, the incumbent PM, Shehbaz Sharif.

Ismail’s role abruptly ended once the IMF package was secured.

Taking up one of the toughest jobs at the height of the economic crisis, he led the effort to save Pakistan from default and successfully negotiated the IMF programme,” he tweeted after Ismail’s resignation.

Dar has a different prescription to fix the economy. The 72 year old has publicly said that subsidies should not have been removed in the manner that Ismail did. In his previous stints as finance minister, Dar has also intervened in the currency market to support the country’s currency. While the jury is out on whether or not his policies will work, he is expected to take measures which will cool prices.

“The government there will have to justify his appointment at a time when Pakistan’s already battered economy has been further hit by the floods,” the analyst said.

“Whichever way opinion goes, one thing is clear: the new finance czar’s performance is the most discussed topic in economic circles. Will he be able to stabilise the rupee, turn the economy around and control inflation? Why did he replace Ismail and what will he be doing differently?” Dawn in a report said.

The newspaper in another editorial piece said that with the dwindling macroeconomic indicators and “the government looking for debt relief and waivers in the aftermath of the devastating floods, any misadventure in managing the currency will prove counterproductive for the economy”.

Though the Pakistani currency has started strengthening with Dar’s entry, the question many are asking is this– Will ‘Daronomics’ as his policies are often described, work this time and help in stabilising the Pakistan’s battered economy?

Also read: Will IMF continue its loan programme under Pakistan’s new finance minister?