Former finance minister Miftah Ismail has blamed the policies—specifically a reluctance to work with the International Monetary Fund (IMF)—of his successor, Ishaq Dar, for the extent of the prevailing economic crisis. “Dar sahib had initially thought that he could either run the affairs without IMF or that a different agreement could be reached by threatening the IMF,” he said in a recent interview, adding that most experts believed this approach would fail. After months of dithering, however, Dar has seemingly realized the need to swallow some tough measures, enacting a series of “reforms” in recent weeks that facilitate the revival of the loan program, but come with punishing inflation.
There is no denying the significant trust gap between Islamabad and the IMF, a result of repeated deviations from the loan facility. Dar did little to bridge this, indulging in his own deviations with the support of Prime Minister Shehbaz Sharif, who announced subsidies for farmers and exporters despite lacking the finances to fund them. Dar’s overconfidence in securing sufficient financing from “friendly” states to secure a better deal with the IMF was especially unrealistic, as all traditional lenders have made it clear there would be no financial support with the global lender’s sign-off.
The biggest impact on the common of the finance minister’s delays has been short-term inflation—which has been steadily rising for the past two years—climbing to a record-high of 31.5 percent. Meanwhile, the import restrictions introduced by Ismail and continued by Dar have led to a shortage of raw materials, forcing factories to close, and boosting unemployment. The downgrading of Pakistan’s economy by international ratings agency—a process that started under the PTI-led government—has raised further concerns of the country defaulting.
Dar’s stepping back and fulfilling the IMF’s conditions in recent weeks is a welcome development for the country’s macroeconomic security, even as it is unlikely to make much difference to a populace readying itself for even tougher times ahead. The need of the hour is economic reforms; but with rifts within an-already weak ruling coalition, such politically unpopular measures are unlikely to emerge. For now, it’s up to the finance minister to figure a way out of the mess that he has played a major—but by no means singular—role in creating.