Former Finance Minister Ishaq Dar recently expressed optimism that if hisparty were granted another opportunity in the upcoming General Elections,Pakistan’s economy could be on the road to recovery within 3-4 years.However, Dar’s track record, having held the position of finance ministerfour times, the most by any politician in Pakistan’s 76-year history, castsa shadow of doubt on his aspirations.
Dar assumed office as finance minister on September 28, 2022. During histenure, the Pakistani Rupee (PKR) faced significant devaluation, plummetingby Rs. 56.37 to 288.49, marking a 19.5 percent decline. Currently, theinterbank PKR rate stands at 305.6 against the US dollar, reflecting a 24percent drop from the rate of 232.12 recorded on September 28 the previousyear.
Notably, Pakistan’s Real Effective Exchange Rate (REER) stood at 90.9 inSeptember 2022, but it rose slightly to 91.59 by July 2023. Despite initialoptimism in the equity markets following Dar’s appointment, the PakistanStock Exchange experienced its worst performance in six years. Key sectorssuch as engineering, automobile, pharmaceuticals, refinery, and cementrecorded significant declines by the end of December 2022.
Dar’s tenure also brought challenges for entrepreneurs and startups, withpro-IMF policies and heavy taxes deterring foreign direct investment.Funding for Pakistan’s tech ecosystem declined significantly, reaching only$15.15 million in October-December 2022, marking a sharp drop from the$5.025 million recorded in January-March 2020. In January-March 2023,startup funding fell by 86.6 percent compared to the previous year.
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Electricity and petroleum costs escalated during Dar’s tenure. Powertariffs increased by Rs. 15.41, and taxes on commercial and domesticconsumers rose by 78 percent and over 50 percent, resulting in an overall80 percent increase in power tariffs over the past year and a half.Similarly, petroleum product rates surged, with petrol rising by 35.8percent and high-speed diesel by 32.5 percent from September 2022 to August2023.
The specter of default haunted much of Dar’s tenure, negatively impactingPakistan’s domestic markets and dollar-denominated foreign maturities.Moody’s Investors Service downgraded Pakistan’s credit ratings, and FitchRatings followed suit with further downgrades in 2023, pushing the countrydeeper into the junk category.
