'Times have changed now': Experts weigh in as Dar set to make comeback as finance minister

Ishaq Dar seems set for a comeback to the top seat at the finance ministry as the currency market seemingly factored in his return with a bullish stance on the rupee on Monday.

The appointment adds to the drama in an already volatile political and economic environment where Pakistan, reeling from devastating floods and pursuing reforms indicated by the International Monetary Fund (IMF) programme, is also hoping for debt relief from international creditors and friendly countries.

Miftah Ismail, who ended his second short tenure as finance minister by announcing his verbal resignation on Sunday, clarified that Pakistan was not seeking relief from commercial bondholders, a statement that came after the country's bonds slumped to just half their face value on Friday.

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While the political atmosphere is likely to get even more tense, with the main opposition Pakistan Tehreek-e-Insaf (PTI) likely to become louder in its chants against the coalition-led government, market experts and analysts say "times have changed" since Dar was last finance minister.

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Dar, a close aide to Pakistan Muslim League-Nawaz (PML-N) supremo Nawaz Sharif, has a reputation of being an advocate of a strong rupee, and comes back to the country as the party moves to secure its vote-bank, which experts say has gotten seemingly alienated due to decades-high inflation figures.

“It's more of a politically-driven move than an economic one,” Saad Khan, Head of Research at IGI Securities, told Business Recorder.

“There is very little room for optimism, as times have actually changed considerably since Dar’s last stint."

The analyst highlighted that commodity prices remain high in the international markets, whereas the country’s foreign exchange reserves are at a very low level.

“Apart from domestic economic issues and political turmoil, international developments too, are not in favour of Pakistan."

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For Pakistan, being in an IMF programme, there is “very little room” for Ishaq Dar, he added.

Meanwhile, Tahir Abbas, Head of Research at Arif Habib Limited (AHL), told Business Recorder that Dar's arrival coincides with a crucial time for Pakistan.

“His timing is critical as Pakistan has appealed to international lenders and countries for debt rescheduling, whereas additional inflows are expected in the wake of floods. These developments, if they materialise, would improve dollar inflows and resultantly stabilise the rupee,” he said.

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"It is expected that Dar would be better at negotiating these deals," Abbas said.

“Moreover, commodity prices are expected to decline as well, which would bode well for the economy."

On currency depreciation, Abbas said the currency is now under a market-based regime.

"It can only be done through administrative measures as we are now in a market-determined exchange rate regime. Hence, there isn't much room on offer here."

However, administrative measures can be taken, especially pertaining to export proceeds and improving tax collection.

“The tax base needs to be enhanced, especially agriculture tax should be collected. However, I doubt that such a step could be taken by the incumbent setup,” he said.