Miftah Ismail, an economist with a PhD from the University of Pennsylvania, was perhaps better suited to deal with Pakistan’s economic crisis but was replaced by Ishaq Dar, who faced corruption charges and was declared a proclaimed offender after fleeing the country in 2017
In the summer of 2022, devastating floods submerged one-third of Pakistan and left 1,400 people dead and 33 million displaced. It cost the country an estimated $30 billion or 9% of the Gross Domestic Product (GDP), widened the current-account balance, and depleted hard currency.
Miftah Ismail, a former economist with the International Monetary Fund (IMF) and a PhD in public finance from the Ivy League University of Pennsylvania, was perhaps better suited to deal with the escalating crisis having taken office four months earlier in April 2022 as the finance minister following the fall of Imran Khan’s government.
But three-time former prime minister Nawaz Sharif, the de facto leader of the biggest party in Pakistan’s ruling alliance, sacked Ismail for no apparent reason to pave the way for his close family member, Ishaq Dar, to take over as the finance minister.
Ismail seemingly kept the seat warm for Dar, a chartered accountant by training who was declared a proclaimed offender over corruption charges after fleeing the country in 2017. Dar sought asylum in the United Kingdom after his passport was cancelled.
Dar was given the key post as soon as his return to Pakistan was ensured by subverting the legal processes after the Sharifs managed their way back into power when Khan fell afoul of the country’s military establishment.
Pakistani politicians are notorious for their inability to see beyond their noses and much of Pakistan’s economic crisis has to do with this. Dar’s elevation as the finance minister is a case in point.
Top party and government positions under Nawaz Sharif and now his brother, Shehbaz Sharif, the current prime minister, have remained with their family and fellow Kashmiris.
Dar, a Kashmiri, is the father-in-law of one of Nawaz Sharif’s daughters. Pakistan’s economic crisis has since September 2022 deepened under his watch with all but emptied foreign exchange reserves. The country is now left with dollars to cover a month of imports.
Dar’s negotiations with IMF have failed to clear the $1.1bn loan needed to prevent Pakistan from going bankrupt. Pakistan is already struggling to service its high levels of foreign debt as the annual inflation soared to the highest since 1975 to over 27% in January. The Pakistani rupee is now at a record low of 275 to the dollar.
The Covid-19 pandemic and Russia’s invasion of Ukraine worsened Pakistan’s economic crisis. The invasion led to an increase in global fuel prices. The floods destroyed farmland and led to an increase in the prices of items such as wheat and onions.
Between Rock And Hard Place
To make matters worse, there appears to be no light at the end of the tunnel. Pakistan has essentially been caught between a rock and a hard place.
Imran Khan’s my way or the highway politics contributed to political instability and Pakistan’s economic crisis. He promised to change Pakistan’s deeply flawed political culture by replacing the self-centered politics of dynasties.
Khan instead ended up creating a personality cult while governance went for a toss. He continued his game of thrones when any sensible leader would have been expected to bury the hatchet to save the country from default.
Khan insisted on having snap polls when the floods added to the instability. He addressed rallies to press for his demand while claiming he was removed from power at the behest of the United States (US) before backtracking from the charge.
Khan has refused to accept opponents as legitimate rivals and shown a lack of mutual tolerance and forbearance, which Pakistan needs badly for democracy to take firm root.
He chose confrontation when Pakistan needed consensus to sort out its existential problems and left the country more polarised. Khan promised a ‘new Pakistan’ but proved no better than traditional politicians.
The Sharifs do not appear to have learnt much from their past mistakes including blatant nepotism that has marked their politics. When he became the prime minister in the 1990s, Nawaz Sharif gave the reins of power to his brother, Shehbaz Sharif, in Pakistan’s biggest province of Punjab.
The control of their party was handed over to Shehbaz Sharif following Nawaz Sharif’s disqualification from holding public office for allegedly buying luxury flats in London through illegally obtained money via offshore holdings.
Shehbaz Sharif’s son, Hamza, briefly headed the provincial government last year before Imran Khan’s party managed to wrest power from the Sharifs in Punjab. Like his uncle and father, Hamza also faces corruption allegations but remains in charge of the party in Punjab.
Nawaz Sharif’s daughter, Maryam, is widely seen as the heir to Nawaz Sharif in national politics.
The Status Quo
Pakistan’s politics has over the last three decades been all about dynasties such as the Sharifs with little commitment to ideology. The status quo has been maintained through kinship and patronage networks.
The Sharifs have preferred their own – Kashmiris– for key Cabinet posts. Nawaz Sharif’s insistence on having fellow Kashmiri Ziauddin Butt as the army chief precipitated the coup that cut short his second term in power in 1999.
The coalescing of the 14 political parties to oust Imran Khan in 2022 was seen as a desperate attempt by the traditional dynastic politicians to save the status quo under which power has remained with two families over the last three decades.
Shehbaz Sharif replaced Imran Khan as the Prime Minister only because Nawaz Sharif and Maryam were then ineligible for the top post because of their conviction of graft.
His government has suffered a credibility crisis as Nawaz Sharif has been accused of remote controlling it from the United Kingdom, where he has lived since 2019.
The elder Sharif has not returned since he was allowed to go to London for treatment on the condition that he will come back to serve his remaining prison term.
Shehbaz Sharif and his Cabinet colleagues have frequently visited London to consult with Nawaz Sharif. Key members of the Cabinet were away in London as Pakistan grappled with issues such as price rise and a faltering economy.
Pakistan’s economic crisis marks a stunning reversal of the country’s high growth rates that began in the 1960s when the country’s economy was revived through agrarian reforms, a stimulus to the industry, and foreign investment.
State-backed capitalism and alliance with the US powered a ‘golden era’ of high growth rates in the 1960s. The growth was significant enough for the international media to take note of it.
In January 1965, New York Times went on to predict that Pakistan might be on its way towards an economic milestone reached ‘by only one other populous country, the United States.’
A year later, The Times, London, called Pakistan’s survival and development ‘one of the most remarkable examples of state and nation-building in the post-war period.’ Pakistan was ‘considered to be one of the few countries at the time that would achieve developed-country status.’
As the economy has continued to suffer over the last decade or so, an ingrained culture of charity has been Pakistan’s saving grace.
Pakistanis contribute significantly to zakat (charity, the third of Islam’s five foundational pillars, which literally means something that purifies) paid globally.
Muslims account for the world’s 22% population and are believed to have paid almost $2 trillion in charity in 2015. By 2020, this was projected to surpass $3 trillion, which is equal to the size of the French economy.
A Muslim is obliged to pay at least 2.5% of savings, investments, and the value of valuables such as gold and silver, as zakat. A bulk of the charity is paid through non-banking channels and helps a large section of people in Pakistan make ends meet.
According to the research by Development Initiatives, a global organization involved in harnessing data to end poverty and reduce inequality, zakat in Indonesia and Pakistan could potentially meet all ‘current requirements to respond to domestic humanitarian emergencies, with significant amounts remaining to cover other areas of zakat spending.’
But for an inept and greedy ruling elite, harassing any form of potential is a tall order.
Sameer Arshad Khatlani is a journalist and the author of The Other Side of the Divide