Tuesday, January 31, 2023
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Another economic disas-Dar

The ‘Dar peg’ has been historic for its toxicity, its snivelling arrogance, its unsustainability and its complete unsuitability.

Former finance minister Ishaq Dar. — Twitter/@business/File
Former finance minister Ishaq Dar. — Twitter/@business/File

The Sharifs of London have miscalculated badly, but the costs of the miscalculation and the disas-Dar being unleashed on the economy are not going to be borne by them. Nor will the costs be borne by the PPP, their partners in the perplexing, disappointing, and the historically inept coalition that governs Pakistan today.

Indeed, the costs will also not be borne by the establishment that today is forced to cling to the very political parties it had sought to make obsolete back in 2018. Most of all, the Sharifs of London miscalculating what decade we are in and what Ishaq Dar’s actual faculties are good for, will not result in any costs that will be borne by Imran Khan – that self-inflicted plague that afflicts Pakistan’s elite and will not be cured, perhaps for decades.

The costs of this particular episode of ‘Daronomics’ are going to be borne by Pakistanis outside the cool shade of protection that the country’s informal institutions and public policy architecture provide to military officers, the bureaucracy, judiciary, banks and bankers, crony capitalists, real-estate mafiosos and lazy agriculturalists that the entire system works to protect. Food inflation is going to get back on the runway this week and take off, almost vertically. The devastation of the 2022 superfloods has caused a collapse of whatever little there exists by way of social protection in Balochistan and Sindh – those communities are not going to be better off because the IMF programme forces itself onto the Pakistani economy.

A cash-is-king economy will become even further removed from any inkling it has toward digitalization. Revenue will see an immediate boost as imports flood back into the market with the marketization of the US dollar, but this initial boost will only contribute to inflationary pressures and demand is going to almost certainly suffer. Tax collectors are not going to suddenly find a magic formula for getting homeowners to pay fair taxes on their homes, retailers, fair taxes on their turnover, or farmers, fair taxes on their produce. In short, there is great pain coming for Pakistani citizens and consumers – and this pain will continue for the foreseeable future.

The inevitable caving in of Ishaq Dar to the IMF programme will deliver another close shave with default, but an escape, nevertheless. But this suppository will hold for only as long as the Finance Division, FBR and State Bank continue to do to the exchange rate, the interest rate and taxes what they are told to do by the IMF. Since this is a formula for unending pain for Pakistani citizens and consumers, this is also a formula that will end up being suspended again. It turns out that my moniker for the PTI government’s ill-intentioned petrol subsidy last year – as the door hit the PTI’s backside when they exited power, the ‘Tarin subsidy’ – was inaccurate. The Tarin subsidy is the Dar subsidy; and both these subsidies are the poison pills Pakistanis must swallow in the short term, to allow for the continued, unceasing protections this country affords to what has to be among the laziest (and stupidest) elites on the planet.

Growth – the one thing that Daronomics and Tarinonomics were supposedly good for – is unlikely to return to Pakistan. It should now be clear as day that the payoff from this elite-first economic policymaking regime (no matter who is delivering it) is not high enough, nor sustained enough, to make it okay. Other countries that adopt fast tracks to economic growth, do it in a manner that delivers more than 6% or 7% per annum for years and years on end. Since 2000, Pakistan has crossed the 7% GDP growth per annum threshold only once, and the 6% threshold, only four times. Both India and Bangladesh have crossed 6% a total of fourteen times since 2000. India has crossed 7% in eleven of those fourteen years. Bangladesh has done it four times. Both India and Bangladesh have the same legacy British legal system, largely similar judiciaries, and largely similar natural resource advantages and disadvantages.

Most crucially, both countries suffer from at least as much, if not more, corruption, nepotism and cronyism. Journalists in both countries suffer from constraints, spoken and unspoken. Human rights are violated in both countries. Minorities are mistreated in both countries. India and Bangladesh both manage difficult geopolitical equations; both have refugees pouring into them, to varying degrees. Both must manage China’s rise and America’s decline, and the concomitant changes in global affairs. Both countries continue to be incredibly unequal and problematic places to be born poor. Just like Pakistan. But only Pakistan, among the three, seems to have all the same problems exacerbated by a complete and utter absence of economic growth.

Are Ishaq Dar or Shaukat Tarin responsible for putting Pakistan in the vice-like grip of international organizations like the IMF and FATF, and at the mercy of creditors from Beijing or Paris Club capitals? The short answer is: yes. Dar and Shaukat Tarin may be the most powerful individuals in shaping economic policy in Pakistan in the last quarter century. The only one that comes close to these two in terms of sustained power over public policy is Dr Abdul Hafeez Shaikh. The same Dr Shaikh that is resting in a stable, ready to gallop into Islamabad as soon as the establishment loses patience with this circus. Partisans will scowl at the comparisons – but that is what being partisan is all about. The more interesting question is whether these three men are any different from one another. Are they? Can they be? This is where a longer answer is merited.

No finance minister – given the political leadership and system, given the insecurity of tenure of civilian leaders, and the geopolitical circumstances – can do dramatically different from what Tarin or Shaikh or Dar have done. But all three should have. Especially Dar. The ‘Dar peg’ has been historic for its toxicity, its snivelling arrogance, its unsustainability and its complete unsuitability. Even in the pantheon of the series of insipid, old-man-for-rich-bosses public policy, the last four months of the Dar era are exceptional.

But this lament is incomplete and unfair without an assessment of the Sharifs of London and the decision to fire Miftah Ismail and replace him with Ishaq Dar. Decision-making is the primary metric against which leaders are measured. Imran Khan was always out of his depth as a leader. On economic policy, this meant that he could not stick to his natural choice of finance minister, Asad Umar, and appointed whoever General (retd) Qamar Javed Bajwa told him to – first Abdul Hafeez Shaikh and then Shaukat Tarin. Perhaps this was the nappy that Chaudhry Pervez Elahi once referred to in describing the delicate and tender care that the military took to enable and sustain Imran Khan as prime minister.

Nawaz Sharif is supposed to be the polar opposite of Imran Khan in maturity, vision, wisdom and leadership capability. He should not be struggling with basic decision-making. But in this era of anti-Imran coalition politics, the Sharifs of London have essentially been reduced to Imran Khan circa 2018-2019. Uncertain. Bungling. Prone to nonsensical statements and even more nonsensical gaffes.

Instead of sticking with a finance minister that was demonstrably capable of managing the firefight that the Sharifs of London had knowingly signed up to in backing General Bajwa’s firing of Imran Khan, they succumbed to the family-first formula that has destroyed the Sharif brand.

Weavers of democratic fiction in and around the Sharifs of London camp have continued to sustain fantasies about what the PML-N now stands for. But the destruction of Pakistan’s economy over the last four months – a disaster with few parallels in an economy that has endured plenty of disasters before – speaks louder than the PML-N’s second-rate political communications. In four short months, the Sharifs of London destroyed Shahbaz Sharif’s reputation as a capable administrator, sullied Nawaz Sharif’s record as an enabler of federalist and pluralist governance and renewed the political fortunes of Imran Khan.

In a different country, with a different military and political elite, one could look forward to a new era of politics, featuring the lessons learned over the last six years. Sadly, the grip of a calcified and entrenched military, bureaucratic, and political elite is far too strong in Pakistan. Despite the disaster of Dar as finance minister for the fourth time, little will change here other than names.


The writer is an analyst and commentator.

Originally published in The News