Dar shatters myth of PML-N’s competence — singlehandedly…. M Bilal Lakhani
Ishaq Dar is holding the Pakistani economy hostage to his fetish for artificially propping up the rupees exchange rate versus the dollar. Toyota is suspending production, factories are shuttering operations and importers cant get their LCs opened due to arbitrary quotas. But all is well in the land of the pure because the rupee isnt devaluing. Inflation is skyrocketing and Pakistan is quickly running out of raw materials for export and pharmaceutical industries. IMF is refusing to play ball with Dar and no foreign friends are raining in the dollars. Whats the plan out of this? We have none except keeping the dollar artificially pegged.
Dars fetish for keeping the rupee artificially overvalued versus the dollar isnt new. It resulted in a $20 billion current account deficit in 2018. An artificially high rupee meant it was cheaper to import things than to produce them in Pakistan or export goods. Hence, our industry hollowed out, exports actually declined during PML-Ns last tenure and imports we couldnt afford thrived, bringing us to the verge of bankruptcy when PTI took over. We are now about to watch this bad Lollywood movie on repeat.
This wasnt just bad because Dar hollowed out our exports and blew up an unsustainable current account deficit but also because he squandered low oil prices to spur a consumption boom rather than invest in structural reform of the economy. Dar is doing this again but in a much less permissive external environment. A global recession is coming and Pakistan has already been ravaged by floods but theres no change of strategy by Dar.
Take the floods as a microcosm of this broader story. Compare how PTIs government managed Covid-19 to how PDMs government has managed the floods. Covid-19 was a once in a century health emergency and Asad Umars NCOC used data and transparency to allocate limited health resources, deliver emergency cash transfer via Ehsaas and use a smart lockdown strategy. Meanwhile, there has been so sustained or systemic effort by the PDM government to mobilise support for flood victims and refugees.
Whats remarkable is this PDM government actually started with a reasonably decent Finance Minister in Miftah Ismail but then they went out of their way to change course and install Ishaq Dar. Its clear that Prime Minister Shehbaz Sharif wanted to keep Miftah on as Finance Minister but both Nawaz Sharif and Maryam Nawaz invested their personal political capital to make an intervention and bring Dar onboard. There are only two reasons theyd go to bat for Dar: hes family or hes competent. Most likely they thought hes both. Now they own Dars success and will be responsible for his failures.
However, given how much of a spectacular failure Dar has been, its also a commentary on how out of touch and lacking in competence the highest echelons of PML-Ns leadership are. Perhaps the only rational explanation for Dars incompetence is that hes not been sent in to manage Pakistans economy as much as hes been sent in to manage PML-Ns politics. With elections coming at some point in 2023, the big idea is that Dar can somehow get the rupee to appreciate and help PML-N win the next elections. This is where the cluelessness of PML-Ns leadership is even more staggering.
The strength of a currency is an outcome of how well an economy is managed but Dar appears to believe that its an input to how well an economy can be managed. You cant keep the rupee propped up at the expense of an economy shutting down factories, firing labour and skyrocketing inflation. Thats the opposite of managing an economy well. But this is the man we have as Finance Minister today and it tells us everything we need to know about this governments competence.
Courtesy The Express Tribune