Finance Minister Ishaq Dar, who delivered the Budget 2022-23 (July-June), has been a key figure in the economic policies and decision-making of the Coalition Government.
Looking at his tenure as finance minister in Prime Minister Shehbaz Sharif’s government allows us to evaluate his performance, effectiveness, aspirations, and impact on Pakistan’s economic landscape.
- Economic Stewardship: Dar’s tenure as finance minister has been a tumultuous journey, marked by a blend of achievements and disappointments. Inheriting an economic quagmire riddled with governance lapses, mismanagement, and instability, Dar embarked on a mission to steer Pakistan toward stability. His measures, including stringent austerity, revenue mobilization, and securing external financing, yielded some glimmers of progress. However, the failure to conclude the IMF program earlier under his leadership cast a shadow of prolonged uncertainty over the nation. The consequent desperation for economic relief towards the end of his tenure has inflicted profound anguish on the emotional, economic, and physical well-being of countless individuals connected to Pakistan. The impact has been far-reaching, leaving behind a trail of shattered hopes and shattered lives.
Fiscal Management: Dar’s approach to fiscal management has been the subject of intense scrutiny and critique. While he placed a strong emphasis on fiscal prudence and austerity measures, doubts linger regarding their sustainability and effectiveness. The persistence of budget deficits and the increasing reliance on external borrowing throughout his tenure raise legitimate concerns about the long-term fiscal stability of the country. Furthermore, the lack of transparency and accountability in managing public finances, including the allocation and utilization of development funds, poses a significant challenge. This situation was exacerbated by the initiation of infrastructure projects during the final days of the PDM government, seemingly driven by political motives rather than sound financial planning, with Dar and his bosses — the Sharifs at the helm.
- Structural Reforms: One of the key areas where Dar’s performance falls short is the implementation of structural reforms. Despite rhetoric on the need for reforms, there has been limited progress in critical sectors such as taxation, energy, and governance. Reforms in tax administration and the broadening of the tax base have been sluggish, and the energy sector continues to face significant challenges, including circular debt and inefficiencies. The lack of tangible progress in these areas raises concerns about the government’s ability to drive sustainable economic growth.
- Public Debt and External Financing: During Dar’s tenure, Pakistan’s public debt increased significantly, raising concerns about the country’s debt sustainability. The reliance on external financing, including loans from international lenders, has been a cause for scrutiny. The terms and conditions of these loans, along with the burden they place on future generations, need careful evaluation. There is a need for a comprehensive debt management strategy and effective utilization of borrowed funds to ensure they contribute to productive investments and development.
- Inclusive Growth and Social Development: The budget speech and Dar’s tenure as finance minister have been criticized for the limited focus on inclusive growth and social development. While some relief measures for the poor are mentioned in the speech, the lack of specific details and concrete initiatives raises questions about the government’s commitment to addressing income inequality, poverty, and social welfare. The absence of comprehensive poverty alleviation programs and targeted measures to uplift marginalized communities reflects a missed opportunity to address pressing socio-economic challenges.
- Transparency and Accountability: Transparency and accountability in economic governance remain major concerns during Dar’s tenure. There have been allegations of corruption and lack of transparency in economic decision-making processes, including issues related to alleged financial mismanagement and misappropriation of funds. The lack of clear fiscal details, including revenue targets and expenditure allocations, raises doubts about the transparency and credibility of the government’s financial planning.
- Currency Depreciation and External Sector: One of the critical areas of concern during Dar’s tenure has been the significant depreciation of the Pakistani rupee. While a certain level of depreciation can be attributed to external factors, the extent of the depreciation raises questions about the effectiveness of the government’s exchange rate policies and its ability to manage external sector imbalances. The impact of currency depreciation on inflation, import costs, and external debt servicing has been a burden on the economy.
- Taxation and Business Environment: Despite rhetoric on improving the tax system and creating a favorable business environment, the government’s efforts under Dar’s leadership have fallen short. Tax reforms have been slow, and the burden of taxation has largely fallen on a narrow tax base. The complex tax structure and cumbersome tax filing processes continue to discourage investment and hinder business growth. Moreover, the lack of clarity and consistency in tax policies and frequent changes have added to the uncertainty for businesses.
- Public Sector Enterprises: The performance of public sector enterprises (PSEs) under Dar’s tenure has been a matter of concern. Many PSEs, including energy companies and national airlines, have incurred substantial losses and struggled with inefficiencies and mismanagement. The government’s failure to implement comprehensive reforms and ensure transparency and accountability in PSEs has led to significant financial burdens on the national exchequer and hindered their potential to contribute positively to the economy.
- Wealth Disparity and Social Welfare: One of the persistent challenges in Pakistan is the wide wealth disparity and inadequate social welfare measures. While the budget mentions relief measures for the poor, the overall impact of Dar’s tenure on reducing income inequality and improving social welfare has been limited. The lack of targeted poverty alleviation programs, inadequate investment in education and healthcare, and the absence of comprehensive social protection schemes have hindered progress in addressing these pressing socio-economic issues.
- Corruption and Governance: Corruption and governance issues have remained significant challenges throughout Dar’s tenure. Despite claims of improved governance and transparency, allegations of corruption within the government and financial institutions have persisted. The lack of effective mechanisms to combat corruption and enforce accountability has undermined public trust and hindered economic progress. Strengthening institutions, promoting transparency, and implementing robust anti-corruption measures are crucial to fostering a conducive environment for economic growth.
- Communication and Stakeholder Engagement: An area where Dar’s tenure has been criticized is communication and stakeholder engagement. The finance minister’s ability to effectively communicate the government’s economic policies engage with various stakeholders and address concerns has been a matter of contention. The lack of clear and consistent communication has contributed to a sense of uncertainty and skepticism among investors, businesses, and the public.
- Infrastructure Development: During Dar’s tenure, there have been notable infrastructure development projects, particularly in the energy and transportation sectors. The government’s focus on addressing the energy crisis and improving the country’s infrastructure is admirable. However, concerns remain regarding the transparency of project procurement processes, cost overruns, and potential inefficiencies in project implementation. Effective monitoring and evaluation mechanisms are essential to ensure that infrastructure projects are executed efficiently and deliver the desired outcomes.
- Job Creation and Youth Employment: Despite the government’s emphasis on job creation, the overall impact on reducing unemployment and addressing youth employment remains limited. The budget speech does not provide a comprehensive plan or specific initiatives to tackle the high unemployment rate, particularly among the youth. Creating an enabling environment for private sector investment, promoting entrepreneurship, and investing in skill development programs are crucial steps that need to be prioritized to address the unemployment challenge effectively.
- Investment Climate: Dar’s tenure witnessed efforts to improve the investment climate in Pakistan, including the establishment of special economic zones and initiatives to attract foreign direct investment. However, challenges such as bureaucratic hurdles, lack of ease of doing business, and concerns over policy consistency and stability continue to deter domestic and foreign investment. Further reforms are needed to create a business-friendly environment, simplify regulations, and ensure a level playing field for all investors.
- External Debt and Debt Sustainability: Another critical aspect of Dar’s tenure is the substantial increase in external debt. While external borrowing is sometimes necessary to meet the country’s financing requirements, the government’s ability to ensure debt sustainability has been questioned. The rising debt burden and debt servicing costs pose significant challenges to the long-term economic stability of the country. Strengthening debt management strategies, improving revenue generation, and promoting export-led growth is essential to mitigate the risks associated with growing debt.
- Inflation and Cost of Living: Despite efforts to maintain price stability, inflation rates have remained relatively high during Dar’s tenure. The impact of inflation on the cost of living, particularly for low-income households, has been a significant concern. The budget does not provide clear strategies to address inflation or alleviate the burden on consumers. Implementing effective monetary policies, addressing supply-side constraints, and strengthening social safety nets are necessary to mitigate the adverse effects of inflation on vulnerable segments of society.
- Economic Diversification: The budget is also silent on providing a comprehensive roadmap for economic diversification, which is crucial for long-term sustainable growth. Overreliance on a few sectors, such as textiles and remittances, exposes the economy to external shocks. Encouraging innovation, promoting research and development, and supporting emerging industries can help diversify the economy and reduce its vulnerability to external factors.
- Creating an Economic Narrative: Finance Minister Ishaq Dar’s tenure has been marked by a lack of effective initiatives to kickstart the economy. Despite the government’s focus on creating fiscal space, there has been a notable absence of policies that create a positive business environment and attract foreign investors to consider Pakistan as an attractive investment destination. The failure to establish a clear economic narrative for the country is a collective shortcoming of successive governments, and Dar’s tenure reflects an outdated approach to governance reminiscent of the 90s. Furthermore, his actions, including playing politics with the International Monetary Fund (IMF), showcase a manipulative approach rather than a sincere commitment to governing the nation. This is evident in his inability to satisfy the IMF team and the subsequent correction and denial of his illogical statements by the IMF mission in Islamabad.
- Dar in a Nutshell: Finance Minister Ishaq Dar’s tenure has been marked by both positive and negative aspects. While his efforts to stabilize the economy and restore macroeconomic stability are noteworthy, there are concerns about the sustainability of fiscal policies, limited progress in implementing structural reforms, and the lack of focus on inclusive growth and social development. Transparency and accountability remain significant challenges that need to be addressed to foster public trust and ensure effective economic governance. A comprehensive and sustainable economic vision, coupled with tangible reforms and greater emphasis on social welfare, is crucial for long-term economic prosperity in Pakistan.
