Finance Minister Ishaq Dar used to be a proactive manager until a couple of months back but lately, has been completely sidelined. Are his days numbered? Is he looking for a narrow escape? Whatever the case may be; his silence is not good for the economy.
He used to react to any analysis or news relating to fiscal affairs, external debt, foreign reserves or currency depreciation. Now the SBP reserves are falling fast whilst FE25 deposits are growing at an uncomfortable pace, which implies that the confidence on currency stability is eroding. There are rumors that multilaterals are hinging their disbursements on currency depreciation. No matter how exaggerated the rumors are, Dar's silence is unacceptable.
He should lead from the front and come up with solutions to counter the decline in reserves. If he cannot do that, there is little reason for him to keep his post. He has already been replaced by the PM from the ECC chair and is no more the de-facto Prime Minister. But he still holds a key ministry and economic management is being compromised by his political weakening.
Good news is that neither the WB nor ADB are thinking about halting planned disbursement for both programme and project lending for FY18. That said, the institutions do take their medium term decisions based on IMF assessment. And recall that the IMF has not exactly painted a rosy picture in the latest country report on Pakistan.
Multilaterals may have not yet decided upon any change in their course of actions; but there are no guarantees that they will not. Political stability has high weightage for donors/lenders, at times more than economic progression. Even in the days of the economic weakening, donors at times, come up with emergency support programme. That was the case after the 2008 crisis.
Today the economic condition is not that bad. But, political instability is very high. The political climate has changed dramatically since the last IMF meeting and current account deficit has sharply widened too.
The IMF can raise flags in upcoming review and perceptions of other multilaterals can change accordingly. The supposed job of finance minster is to form policies and engage with the Fund and other agencies to not let it slip. However, Dar is too occupied in cleaning his own mess and not at all showing any interest in public to give the impression that he is a hands-on finance minister.
The need of the hour is to avert the falling trend in reserves. One way to do is to go to international capital market for Eurobond issue. Investors' appetite is there for bonds, as even Iraq has of late raised $1 billion. The bond was seven times oversubscribed which enabled the lead manager to lower indicative yield by 25 bps to issue at 6.75 percent.
The question is when Iraq can raise the money so easily why can't Pakistan also do it? If Dar’s focus is elsewhere, he should let someone else run the economy.
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