Finance Minister Ishaq Dar must have spent the last few days, since the zero-interest surprise disappeared from the headlines, waiting for the mullah lobby to come rallying behind him; lifting his party’s, perhaps even the rupee’s, fortunes once again.
Since there’s been no serious debate about a policy that will plunge the economy into completely uncharted waters, and no serious questions have been answered – not even about the fate of crucial bailout loans, which run into plenty of interest – one can only assume that this was just one of those usual gambits for political mileage.
If that’s true, then Dar sb should prepare to cut a sorry figure on at least three separate occasions. First in front of the party bosses, who’ll be disappointed that their own Riyasat-e-Madina initiative fizzled out so quickly.
Then he’ll be grilled by banks that never trusted nor wanted this transition and businesses whose financing has suddenly, and without any consultation, become hostage to the conservative right’s obscure interpretation of the scripture. And then he will have to answer to the people.
They let his pictures from intensive care become stale news so quickly because their desperation duped them into believing in his Darnomics once again; that the rupee would march back below 200 to the dollar, that he would bend the Fund and sort out ratings agencies, and that he’d get a zero-interest economy to make pious Muslims out of us even if it pushed the country towards complete financial isolation and collapse.
Markets hate uncertainty more than anything, even bad news which is promptly priced in. And while Dar sb’s been waiting, uncertainty about the direction of the economy, especially about the IMF (International Monetary Fund) programme, has pushed Pakistan’s credit default swaps (CDS) up 1,929 basis points to 75.5 percent in a matter of days, the highest rating since data became available in November 2006.
That means the loans we constantly need to avoid sovereign default have just become a lot more scarce and a lot more expensive (higher interest). So just staying above water will require us to become more desperate for just the kind of loans that will not be sharia compliant in this Islamic republic after 2027, the Federal Shariat Court’s (FSC’s) cutoff date for the transition.
Now there’s more uncertainty down the road because FSC’s verdict didn’t shed any light on whether the country would be allowed to cross the line and borrow on interest from bi- and multi-lateral donors, or where constant bailout money will come from if it can’t, or what the government will keep pledging to continue borrowing in the domestic market. So neither the spike in CDS, nor another fall in the rupee, will stall unless there’s some clarity.
These are all very tough questions and answering them might well make the government question the FSC’s jurisdiction, or even mandate itself. It was setup by a dictator who violated his oath, executed a deposed PM, drenched his regime in religious symbolism for purely political gain and planted the seeds of all shades of Taliban that torment us to this day.
And now it is ridding the country of usury even though it didn’t, in any way, advance the very wide and still uncertain debate about when, how and in which circumstances the interest rate can be interpreted as prohibited usury.
But the hordes Dar sb’s waiting for were not cultivated to indulge in such subtleties. They are weights on a scale, meant to tilt it one way or the other and give the party or personality of preference the force of shariah compliance at the same time.
And it’s a shame that the religious sensitivities of ordinary Pakistanis, one of the largest populations within a national boundary anywhere in the world, are exploited and preyed upon to feed the political elite’s naked lust for power.
That’s why Dar sb won’t mind waiting a while longer, even throw another bone or two at them. But with CDS climbing and an election drawing near, how long can he really wait?
Copyright Business Recorder, 2022
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