Desperate Dar

In a special broad-cast televised live on national TV yesterday, the federal finance minister Ishaq Dar made a public address announcing a ‘momentous’ decision to transform Pakistan’s economy. PML-N’s finance wizard claimed that PDM’s coalition government – under Shahbaz Sharif’s leadership – had decided to withdraw SBP and NBP’s appeal against a Federal Shariat Court decision directing the government to make Pakistan’s banking system interest-free

Back in April 2022, FSC in a long pending case noted that Pakistan’s existing banking system was un-Islamic, declaring that “elimination of Riba from economic system is the religious as well as constitutional duty; hence it must be eliminated from Pakistan”. FSC directed the federal and provincial governments to amend all relevant laws and issue directives to make sure that the country’s banking system is interest-free, setting a compliance deadline of December 2027.

According to news reports, the case had first been filed with the Federal Shariat Court in the 1990s, and went through subsequent rounds of appeals, suspensions, and review. Subsequently in June 2022, State Bank of Pakistan and the commercial banks challenged FSC’s decision in the Supreme Court, seeking guidance of the SCP appellate bench on the matter.

Never mind the merits of the original decision, the timing and optics surrounding the announcement almost certainly betray a sense of desperation on the part of ruling coalition. Since the news was still breaking at the time of this writing, it is still unclear whether a decision was reached through consensus by the federal cabinet or has been made by a select coterie of advisors, a longstanding tradition of the Sharif family.

That finance minister Dar – who has been missing in action for nearly past two weeks – decided to re-emerge to make ‘this’ announcement from the shadows is extremely telling of the misplaced priorities of the ruling coalition. Although the Prime Minister is commendably engaged in fighting the good – and existential – fight for Pakistan’s future at COP-27, his decision to fully outsource Pakistan’s economic management to a lone bunco artist brings no comfort.

It may be worth remembering that after his initial relaunch surrounded by much fanfare, Dar’s behavior has been – for the lack of a better word – unbecoming for his role. From threatening international rating agencies with a ‘befitting response’, to giving a target price for Rupee’s fair value like a sell-side broker, Dar has brought lots of bluster, yet achieved precious little. That’s not to downplay the unprecedented nature of challenges facing Pakistan’s economy today in the midst of a virtual political breakdown, but to insist that his actions – especially yesterday’s –hardly inspire any confidence.

Never mind that SBP had earlier clarified through a press release that its appeal sought guidance from the Supreme Court for implementation of the decision, and not contested the substance of the ruling. Never mind also that by withdrawing the regulator (SBP) from the appeal, the federal government has left the commercial banks that are also party to the case in a lurch. Never also mind that if the decision is upheld, Pakistan can forever say goodbye to the four foreign banks currently operating in the country, which may have no interest in conforming their internationally guided internal rules and regulations to religious laws as determined by the state of Pakistan.

But most importantly, the decision manifests the mindset of Pakistan’s political class. Facing deadlock over the endless series of protests and lockdowns by the PTI led opposition, it is hard not to speculate that the announcement by the finance guru is purely an electoral gimmick.And in future, policymakers may find some excuse relating to international financial obligationsor external debt to roll it back.

However, from here on, if the PML-N led government is ousted from power or loses to PTI in the general elections next year, it would hardly be surprising if it uses the decision to build a narrative, claiming that the ouster was brought about by enemies of Islam because it had tried to eliminate “riba” from the country. In a bid not too different from Imran Khan’s claim of “foreign conspiracy”, this will now live forever in infamy. If only Pakistan’s political leadership could use half the manhours engaged in constructive dialog over policymaking and legislation - their primary role – as they do over “building narratives to spoon feed the useful idiots”, Pakistan could be a very different place today.