ISLAMABAD - PML-N senior leader Ishaq Dar is all set to take the charge as finance minister to tackle economic challenges especially skyrocketed inflation and currency depreciation, which has become a serious challenge for the incumbent government.
PML-N supremo Nawaz Sharif and Prime Minister Shehbaz Sharif in London had decided to appoint Ishaq Dar as new finance minister by replacing Miftah Ismail — who saved the country from possible default after taking tough decisions. However, multi-decades high inflation rate and all-time high dollar value were annoying Nawaz Sharif and his daughter Maryam Nawaz, which resulted in early departure of Miftah as finance minister.
PML-N leaders believed that Ishaq Dar would bring the dollar value to below Rs200. In his previous tenure as finance minister (2013-2017) Dar had not let the local currency to cross Rs100 benchmark through intervening in open market. However, Miftah believed in free currency market and does not believe in intervening in market to control the currency value. The currency market responded positively on the first day after PML-N decided to appoint Dar as finance minister. Local currency appreciated by Rs2.63 against the greenback in interbank and closed at Rs237.02 on Monday as against Rs239.65. In open market, the local unit has posted a massive recovery of Rs7 and was being traded around Rs238.
Experts are of the view that it would be a great challenge for Ishaq Dar to control the rupee value through intervention as the State Bank of Pakistan (SBP) does not have sufficient dollars to be used for currency appreciation. Foreign exchange reserves held by SBP dipped to $278 million, clocking in at $8.35 billion as of September 16, 2022. On the other hand the international creditors are not releasing loans for Pakistan despite the country had revived International Monetary Fund (IMF)’s loan programme.
Meanwhile, the IMF would also oppose the decision of intervening in the market to control the currency value.
Another challenge for the economic wizard of PML-N would be the tough IMF deal. Dar is the only finance minister in Pakistan’s history who had completed the IMF’s programme in 2016 after getting more than a dozen waivers from the IMF. However, the existing IMF’s loan apparently looks tougher than the previous one as the Fund is not giving many waivers as it did in the past.
An official who worked with Ishaq Dar in past has informed The Nation that Dar might renegotiate with the IMF on many issues especially higher petroleum levy to pass on the impact of declining oil prices to masses to control the soaring inflation rate.
The declining oil prices in international market would once again helped the upcoming Finance Minister to control the inflation rate, which had skyrocketed to a multi-decade high of 27.3 percent in August due to the government’s economic decisions including increasing prices of electricity and fuel as well as currency depreciation. Oil prices in international market have fallen to around $80 per barrel, which had gone to around $125 few months back. In his (Dar’s) previous tenure, 2013-2017, oil prices were reduced significantly globally, which forced the then government to reduce the petroleum products prices in the range of Rs60 to Rs70 per litre.
On the other hand, Miftah Ismail had paid the price of tough decisions, which were taken to save the country from possible default. Former Prime Minister Imran Khan on February 28 this year had announced to reduce oil and electricity prices by giving massive subsidy and tax amnesty scheme for industrialists, which resulted in suspension of IMF’s deal at the time when Pakistan desperately needed dollars.
Later, the IMF had linked the revival of loan programme with the harsh decisions including increasing oil and electricity prices. However, Miftah had accepted the challenge after becoming Finance Minister in April this year by enhancing the prices despite strong resistance from the party leadership and workers.
PML-N vice president Maryam Nawaz Sharif had once said, party supremo Nawaz Sharif “strongly opposed” the government’s decision to raise petroleum prices. In the tweet, Maryam said that Nawaz walked out of a meeting after saying that he “cannot even burden the people with another penny”, and that “if the government’s hands are tied, then I wouldn’t own this decision”. Maryam also distanced herself from the decision, saying that she “stands with the people” and “cannot support this decision”.
However, the tough decisions had revived the much needed IMF’s loan programme and getting $1.2 billion from the IMF. On the other hand, the decisions had fuelled the inflation rate in the country.
Miftah had followed the policy of free exchange market, which took the dollar value to all time high, Rs240. Former Finance Minister had also arranged massive financing from the multilateral and bilateral sources to repay previous loans and build the country’s foreign exchange reserves. The government had arranged financing and investment from friendly countries like Saudi Arabia, United Arab Emirates, Qatar, China and others.