Dar is back

Dar's face seems to have shrunk in direct proportion to the fiscal deficit. Dar made a comeback after a long hiatus from mainstream media and economic decision making. He seems to have taken his indictment on corruption cases too seriously, and sounds focusing on bailing himself out.

Must be said that Dar has proven to one tough individual. He seems to have defied all odds and what the rumor mill was mulling. Apparently, the ousted PM was not on his side, while the current PM surely does not like Dar. But he continues, and by the looks of it, seems to have gotten the nod to continue even longer. He was seen defending four years of his economic management like he used to do before the courts narrowed him down.

Dar came up with selective facts and figures without any coherence in timeline to defend the PMLN economic scorecard. At various instances in his press conference, he compared apples with oranges, to probably make peaches out of it.

That he is best at. It appears that the armed forces' comments on economy have given him lifeline within the PMLN. All said, it is refreshing to see him back. BR Research in the past few weeks has repeatedly asserted that either he should actively manage the economy or leave it for someone who can. It's better for him to complete the full five years as whatever policies he was running should be continued.

The gist of the argument and probably the reason for his press conference was to communicate that Pakistan is not going to IMF anytime soon. It also seemed aimed at negating the negative sentiments prevailing after statements by army chief and a few seasoned economists. Yes, the confidence should be resorted and it is the job of finance minister to lead from the front.

Why it is so important for the country to show presence of a strong finance minister? The simple point is the continuation of economy on five percent growth track which is of utmost importance for generating employment for one million plus youth coming to labour force every year.

Now this with anti-export bias created in the past three decades amid absence of creation of backward industrial linkages lead to high imports and in turn high current account deficit, whenever the economy grows at higher pace. The reason is simple that the national savings and in turn investments are not enough to cater high growth; hence reliance on foreign savings is the only viable way in short to medium term to continue growth momentum.

The options policymakers have is to either tighten the monetary and exchange rate policies to put breaks on growth momentum or to borrow externally to continue high growth. The paradox was well narrated by Dr Asad Zaman in an article published in Business Recorder yesterday. He argued that Pakistan is experiencing a two-gap growth model for development which was sidelined by Chicago style free market economics. But the latter model has failed repeatedly in past few decades.

In two-gap model, shortfall in savings is first gap while the absence of foreign exchange earnings from exports create second gap. The solution for low income countries like Pakistan lies in borrowing to fill in the gaps and invest in high return projects that increase production and exports to take the economy on high growth momentum. Whether Pakistan is actually investing in high return projects is left to be debated for another day.

Dar should take notes from Dr Zaman and should go and borrow money quickly from foreign debt capital market to avert any balance of payment crisis. BR Research has advocated the need of raising money from foreign debt markets sooner than later in the past few months.

With Dar back in action, he should not waste time creating foreign exchange buffers to restore the economic confidence which is imperative for smooth sailing. Yes, we do not need to go the IMF anytime soon; but any external shock can hit the economy fast.