Ending five years of self-exile, Pakistan Muslim League-Nawaz stalwart Ishaq Dar returned to Pakistan on Monday alongside Prime Minister Shehbaz Sharif to take over charge of the finance portfolio, which he has previously held on three occasions.
He replaces the embattled Miftah Ismail, who announced his decision to step down after meeting with PML-N supreme leader Nawaz Sharif in London. Mr Ismail is expected to formally hand in his resignation today, sources said, adding that Mr Dar is also expected to be sworn in, first as a senator and then as minister for finance, on Tuesday.
The change of command at the Ministry of Finance comes during a dark time for the country’s economy, which is hounded by fears of default after being hit by unprecedented currency devaluation and devastating floods.
“I will try my best to fulfil all the responsibilities. We will try to take the country out of the economic swamp it is stuck in […] the way we did in 1998-1999 and 2013-2014”, he said upon arrival at Chaklala airbase, Dawn.com reported.
New ‘guardian of exchequer’ may have easier time than predecessor due to Nawaz’s backing
Mr Dar accompanied PM Shehbaz on board his special plane upon the return of the delegation from a weeklong visit to the United States, where they attended a key session of the UN General Assembly and called on the developed world to reschedule the country’s debt in the wake of devastating floods.
An official who was part of the delegation to the US said the PM and Mr Ismail had a productive meeting with the managing director of the International Monetary Fund (IMF) and had been able to secure assurances for three key programme relaxations in the wake of the havoc caused by the super floods.
These relaxations include: frontloading the remaining tranches by increasing the upcoming $1.1bn tranche due within a few weeks, a three-month freeze on existing taxation on petroleum products and fuel cost adjustments in electricity tariff; and, a relaxation in the current account and fiscal deficit targets to create room for cotton, wheat and rice imports.
This means the amount of foreign exchange needed to compensate cotton crop damage, wheat losses and rice would not be considered against current account deficit target set under the fund programme and gap in revenue collection on petrol and higher subsidies on power tariff would not adjusted against fiscal deficit limit.
As such, the Rs5 per litre monthly increase in petroleum levy and monthly FCA on electricity tariff would cease for three months i.e. until January 1, 2023. These would, however, need to be approved by the executive board of the fund.
This would be a welcome starting point for Mr Dar to build upon, amid the challenges emanating from the risk of default, the crisis created by the Russia-Ukraine war, skyrocketing international commodity prices and domestic flood challenges.
The exchange rate, under the changes made in the laws by the previous government under the IMF programme, is now outside the purview of the finance minister and a sole responsibility of the State Bank of Pakistan. But based on his earlier stints, Mr Dar is widely anticipated to move swiftly to bring the runaway rupee value under control as his top priority.
While the challenges before him are immense, Mr Dar has certain inherent strengths that could put him in a better position to manage things than his predecessor.
In his last tenure as finance minister, Mr Dar was considered the de facto ‘deputy prime minister’ who, at times, led more than four dozen important committees, ranging from economic to political and legal matters. As a result, his word is taken very seriously by all, since he is thought to speak for party chief Nawaz. During his previous tenure, he could even decline requests coming from then chief minister Shehbaz Sharif.
This is in stark contrast to the kind of time Mr Ismail spent at the helm of affairs, where he had to virtually plead for nearly two months with party leadership and coalition partners to reverse the energy and petroleum subsidies, introduced by former Prime Minister Khan in February.
Mr Dar is also known for his unusual interpersonal skills and has long term clout with market players. He can engage with foreign exchange companies and top bankers to push through what he wants with a mix of intimidation and persuasion.