Dar Returns vs. Dollar Returns

Ishaq Dar’s Return: Will the Dollar Follow?

In a decisive move to tackle the nation’s economic challenges, the Pakistan Muslim League (N) has deployed its top player, Ishaq Dar, to take on the daunting task ahead.

Brief Profile of Ishaq Dar:

Born in 1950, Ishaq Dar was raised and educated in Lahore. He graduated with top honors and a gold medal in commerce from Punjab University, where Nawaz Sharif was among his peers. Dar later became the youngest Pakistani to qualify as a Chartered Accountant in the UK. Professionally, he is both a Chartered Accountant and businessman, beginning his career in London before moving to Libya, where he worked as a senior auditor. He returned to Pakistan in 1977 and entered politics as a member of the Muslim League’s Central Committee in 1980. Dar’s first tenure as Finance Minister came in 1998, following Pakistan’s nuclear tests, and he endured two years in prison after the 1999 military coup. In 2004, his family ties with Nawaz Sharif were strengthened when Dar’s son married Sharif’s daughter.

Dar held the finance portfolio briefly for a second time in 2008 under Prime Minister Yousaf Raza Gillani, where he introduced the idea that later became the Benazir Income Support Program. Although he was nominated for Pakistan’s highest civilian award, the Nishan-e-Imtiaz, he declined it from President Asif Ali Zardari. In 2013, he took on the role of Finance Minister for a third term until 2017. Amid Panama Papers and NAB cases, Dar left for London, where he remained for five years, seeking political asylum. Now, he returns to Pakistan, set to become the country’s longest-serving Finance Minister.

Positives of Dar’s Return

With Dar back, ambiguity over political and economic direction can finally be set aside. His return signifies that elections will proceed as scheduled next year, potentially lending stability to the political landscape. The alliance between PDM and the “London League” on this issue is a signal of cohesion. Investors may find renewed confidence, anticipating a reduction in political turbulence, which could bring positive effects on Pakistan’s economy in the near future. Additionally, the PML-N is expected to make strenuous efforts to restore its reputation and provide some economic relief to the public before the next election.

Criticisms Surrounding Dar's Return

For some, Dar’s return as a trusted “caretaker” of PML-N’s interests is unwelcome. Recent audio leaks and previous incidents suggest that Dar’s role is not purely governmental but also serves to safeguard family interests.

Another critique revolves around the PML-N’s structural dependency on a close circle, dubbed the “kitchen cabinet.” Observers wonder if the party will ever mature beyond this inner cadre. In the recent months since Dar’s absence, it’s apparent that the party remains resistant to structural change.

On a technical front, Dar has often been regarded as PML-N’s “dollar expert.” Under his previous tenure, while the dollar remained stable, Pakistan’s trade deficit ballooned, and exports struggled, indicating underlying economic imbalances. He managed to keep the rupee’s value steady, though this ultimately came at the cost of industrial closures and reduced exports.

When Dar took office in 2013, the current account deficit was at $4.4 billion, which grew to $16 billion by 2017. This deepening deficit, with high imports and low exports, created an economic imbalance that invited currency devaluation risks, often leading Pakistan to seek IMF support. Today’s global climate poses far greater challenges, with rising oil prices and global uncertainties from the Russia-Ukraine war.

Different Economic Landscape Now

In 2015, low oil prices and Chinese financing gave Pakistan significant leeway. Today, global oil prices have surged, and China, now more cautious, has curtailed its lending, seeking repayment on previous energy deals. These agreements, hastily made by the PML-N, supplied the country with power then, but today have left Pakistan with burdensome electricity rates. Chinese companies are now pressing their government over outstanding payments from Pakistan, adding strain to the bilateral relationship. Meanwhile, the U.S. has encouraged Pakistan to reconsider its ties with China, asking for “responsible relations” with India.

When it comes to the dollar’s trajectory, the global trend is unfavorable even for major currencies like the British pound and euro, so bringing the dollar back to 182 PKR—a previous benchmark—is unlikely without a substantial shift. The PML-N faces mounting pressure to address this challenge as the dollar’s pre-crisis rate under PTI is often cited by the opposition to criticize the government’s performance.

Upcoming Winter Challenges and the Economic Outlook

With gas prices set to rise further and electricity costs already high, the PML-N faces dwindling options. The recent return of Ishaq Dar signals the PML-N’s resolve to put forth its best efforts. The party is expected to present its achievements as a result of strong economic policies and possibly attribute past failures to external influences.

The rainy season has replenished hydroelectric resources, which should help with electricity rates. While bringing prices to pre-PTI levels may be unrealistic, any relief in fuel and dollar rates could help PML-N regain some public support. As IMF funds are now anticipated, PML-N has seized this moment to reassert control, hopeful that it can reverse its fortunes and make strides towards economic recovery, or at least curb further decline before the next elections.