Dar shatters myth of PML-N’s competence — singlehandedly

Ishaq Dar is holding the Pakistani economy hostage to his fetish for artificially propping up the rupee’s exchange rate versus the dollar. Toyota is suspending production, factories are shuttering operations and importers can’t get their LCs opened due to arbitrary quotas. But all is well in the land of the pure because the rupee isn’t 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. What’s the plan out of this? We have none except keeping the dollar artificially pegged.

Dar’s fetish for keeping the rupee artificially overvalued versus the dollar isn’t 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-N’s last tenure and imports we couldn’t 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 wasn’t 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 there’s no change of strategy by Dar.

Take the floods as a microcosm of this broader story. Compare how PTI’s government managed Covid-19 to how PDM’s government has managed the floods. Covid-19 was a once in a century health emergency and Asad Umar’s 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.

What’s 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. It’s 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 they’d go to bat for Dar: he’s family or he’s competent. Most likely they thought he’s both. Now they own Dar’s success and will be responsible for his failures.

However, given how much of a spectacular failure Dar has been, it’s also a commentary on how out of touch and lacking in competence the highest echelons of PML-N’s leadership are. Perhaps the only rational explanation for Dar’s incompetence is that he’s not been sent in to manage Pakistan’s economy as much as he’s been sent in to manage PML-N’s 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-N’s 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 it’s an input to how well an economy can be managed. You can’t keep the rupee propped up at the expense of an economy shutting down factories, firing labour and skyrocketing inflation. That’s 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 government’s competence.

Published in The Express Tribune, December 25^th, 2022.

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