GILGIT: Finance Minister Ishaq Dar seems like a different man under the newly elected Prime Minister Shahid Khaqan Abbasi, barely a shadow of his former self.
Under former prime minister Nawaz Sharif, Dar was the epitome of a powerful finance minister. Among other laurels, he chaired the cabinet’s powerful Economic Coordination Committee (ECC) till July 28, 2017, when the Supreme Court of Pakistan disqualified his benefactor.
But nothing can more blatantly describe the power he wielded than the full title for the minister of finance. He was known as Senator Ishaq Dar, federal minister for finance, revenue, economic affairs, statistics, and privatisation. During the formation of the new cabinet of Shahid Khaqan Abbasi, the portfolio for the minister of finance was relegated to Federal Minister for Finance, Revenue, Economic Affairs and Statistics.
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The big question here is can such a powerful finance minister benefit the economy? Dar’s stint under Nawaz Sharif can be quite instructive in answering this query.
Whenever a political individual with strong political interests becomes overlord of the entire economy, politics definitely affects economic policy-making and Dar’s economic policies are clear evidence of this. Apart from being the chairman of ECC, he also chaired 35 or so committees which had nothing to do with economic matters of the country but everything to do with politics.
It seems like politics was on his mind from the get-go. Every economic decision under Dar had politics written all over it. It is no wonder then that his economic policies have negatively impacted the economy.
Finance & revenue
Federal government revenue did improve under Dar’s watch but only on the back of predatory taxing measures. We were told that the distinction between filers and non-filers would improve Pakistan’s tax base and document the Pakistani economy by bringing the informal sector into the tax net.
The impact of the policy has been quite the opposite. Fearful of having to pay a number of different taxes in the formal sector, businesses have opted to stay in the informal sector. The informal sector has actually expanded as a result.
On the other hand, the formal sector is fleeced to the point where it has lost its competitive edge to the informal sector and international competitors. Export sector of Pakistan, which is part of the formal sector, has also become uncompetitive compared to export sectors of regional economies like Bangladesh and India. Every major business association in Pakistan has decried Ishaq Dar’s tax policy.
The second tool that Dar employed to increase government revenues was borrowings. Government borrowing has increased significantly under Dar especially from commercial banks and by floating Sukuk bonds in the international bond markets. Interest rates on commercial bank loans and Sukuk bonds are higher than what the Pakistani economy can service.
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To ensure that public debt figures remain under check in terms of rupees for obvious political reasons, Dar had vehemently kept the rupee exchange rate over-valued.
During Dar’s tenure, Pakistan’s economic statistics have lost credibility. Economists and public policy experts have charged Ishaq Dar with data fudging. From changing definitions of economic indicators like public debt to actual calculation of indicators like GDP, statistics related to Pakistan’s economy have become dubious.
In FY 2015-16, when Pakistan’s GDP growth rate was worked out to be 4.2% by the Pakistan Bureau of Statistics. Economists opined that Pakistan’s economic growth cannot be that high especially after sizeable reduction in the agriculture output that year.
As per a news report, GDP growth rate was revised upwards when Dar wasn’t satisfied with provisional estimates presented to him by chief statistician of Pakistan Bureau of Statistics Asif Bajwa in a closed door briefing.
The reasons for painting a rosy picture of the economy are grounded in politics. These GDP growth rates will be regularly mentioned as a symbol of economic achievement by the PML-N during its election campaign. It was even mentioned by Nawaz Sharif in the aftermath of the Supreme Court decision to disqualify him as a hallmark of his premiership.
In its election manifesto, PML-N promised to privatise key state-owned institutions and enterprises. Dar in his capacity of federal minister for privatisation failed to streamline the process of privatisation. According to an estimate, such loss-making institutions are bleeding the economy to the tune of Rs400 billion.
Privatising these institutions would not only have saved billions but would also have turned these institutions profitable in the long-run.
However, hardly any interest was shown. Economic policy will remain clouded by political rather than economic considerations as long as there will be a nosy and micro-managing finance minister in Pakistan. A dar-esque finance minister, that is.
The writer is a researcher and works in the development sector of Gilgit
Published in The Express Tribune, August 28th, 2017.
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