Pakistan Finance Minister Who Secured IMF Bailout to Step Down
ISLAMABAD, Pakistan—In the midst of a deepening economic crisis, Pakistan will get a new finance minister after the incumbent lost support from his political party for agreeing to austerity measures in an effort to win a bailout from the International Monetary Fund.
Pakistan is seeking to climb out of a balance-of-payments crisis that has seen foreign currency reserves fall to perilous levels. Making things worse, massive flooding this summer caused billions of dollars of damage to the economy.
Miftah Ismail,
who has been finance minister since the current government came to power in April, said on Twitter late Sunday that he would formally tender his resignation on Monday, after returning from attending the United Nations General Assembly, where he and Prime Minister
Shehbaz Sharif
lobbied foreign governments for aid for flood relief. The scale of the flood damage, which Pakistan estimates at more than $30 billion, has renewed fears that the country will default on its foreign debt.
Ishaq Dar,
who has served three times previously as finance minister, told reporters in London on Monday—where he has lived in exile since 2017—that he will return to Pakistan this week to take the job again.
“My aim will be to reverse the declining trend of the economy,” Mr. Dar said.
He has publicly said that the terms of an IMF program, completed in August, were too severe. The IMF required the removal of subsidies and the imposition of new taxes. Gas prices, in particular, increased sharply as a result.
“We took the hard decisions,” Mr. Ismail said in an interview. “We took Pakistan out of a default situation. Without the IMF, we would have defaulted.”
Nawaz Sharif,
the former prime minister who retains ultimate authority over the ruling Pakistan Muslim League-N, was concerned that the economic pain inflicted upon the population would damage his party’s prospects in the next election, which is due to be held within about a year, party officials said.
Mr. Ismail said that when he came into office, Pakistan had $10.5 billion in foreign reserves, but it had debt repayments of $24 billion to meet over the next fiscal year, in addition to financing a current-account deficit of $12 billion. After securing the IMF program, Mr. Ismail said he arranged bilateral and multilateral loans to help cover the financial gap.
In his past stints as finance minister, Mr. Dar was known for supporting the value of the rupee by intervening in the market. The rupee, one of the worst performing currencies in the world this year, gained in trading on Monday. The rupee has fallen in value by around 25% against the U.S. dollar since the current government took power in April.
It isn’t clear how a move to prop up the currency can be pulled off now. Under the terms of the IMF program, Pakistan agreed to let the market determine the exchange rate. Foreign-currency reserves cover less than two months’ worth of imports, giving the next finance minister scant leeway to support the rupee.
On Saturday, the World Bank said it envisaged lending $2 billion to help Pakistan deal with the floods.
Mohammad Sohail, chief executive of Topline Securities, a Pakistani stockbrokerage, said that as well as reacting to the news of Mr. Dar’s pending appointment, the rupee was gaining Monday as a result of crude oil prices falling in recent days, as well as the prospective World Bank loan.
Mr. Sohail said Mr. Dar would become Pakistan’s sixth finance minister in the last four years, a turnover rate that added to the country’s economic uncertainty.
“I think that having consistency of policy is more important than who is finance minister,” said Mr. Sohail. “For a country like Pakistan, where there is political instability, some economic stability is important.”
Pakistan has foreign debt of $99 billion, of which $10.7 billion is owed to the Paris Club of lenders—led by Japan—which is owed $5.4 billion.
Mr. Dar has been a close adviser to the Sharif political dynasty since the 1980s and his son married into the Sharif family. He left Pakistan in 2017, while there were legal proceedings under way against him in an anticorruption court. Mr. Dar denies any wrongdoing and said he left to seek medical treatment in London. The court subsequently issued arrest warrants against him. Last week, the courts suspended the arrest warrant against him until Oct. 7, which Mr. Dar has said will enable his return.
Mr. Dar’s return to Pakistan, where he says he will seek to get the case dropped, is seen by political analysts as a test of the attitude of the courts for the possible return of Mr. Sharif, the ex-prime minister and older brother of the current premier. The older Mr. Sharif has also been living in exile in London after a conviction in a corruption court. He has similarly been declared a fugitive by the Pakistani courts. Mr. Sharif denies any wrongdoing, saying that the case against him was politically motivated.
Write to Saeed Shah at [email protected]
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
ISLAMABAD, Pakistan—In the midst of a deepening economic crisis, Pakistan will get a new finance minister after the incumbent lost support from his political party for agreeing to austerity measures in an effort to win a bailout from the International Monetary Fund.
Pakistan is seeking to climb out of a balance-of-payments crisis that has seen foreign currency reserves fall to perilous levels. Making things worse, massive flooding this summer caused billions of dollars of damage to the economy.
Miftah Ismail,
who has been finance minister since the current government came to power in April, said on Twitter late Sunday that he would formally tender his resignation on Monday, after returning from attending the United Nations General Assembly, where he and Prime Minister
Shehbaz Sharif
lobbied foreign governments for aid for flood relief. The scale of the flood damage, which Pakistan estimates at more than $30 billion, has renewed fears that the country will default on its foreign debt.
Ishaq Dar,
who has served three times previously as finance minister, told reporters in London on Monday—where he has lived in exile since 2017—that he will return to Pakistan this week to take the job again.
“My aim will be to reverse the declining trend of the economy,” Mr. Dar said.
He has publicly said that the terms of an IMF program, completed in August, were too severe. The IMF required the removal of subsidies and the imposition of new taxes. Gas prices, in particular, increased sharply as a result.
“We took the hard decisions,” Mr. Ismail said in an interview. “We took Pakistan out of a default situation. Without the IMF, we would have defaulted.”
Nawaz Sharif,
the former prime minister who retains ultimate authority over the ruling Pakistan Muslim League-N, was concerned that the economic pain inflicted upon the population would damage his party’s prospects in the next election, which is due to be held within about a year, party officials said.
Mr. Ismail said that when he came into office, Pakistan had $10.5 billion in foreign reserves, but it had debt repayments of $24 billion to meet over the next fiscal year, in addition to financing a current-account deficit of $12 billion. After securing the IMF program, Mr. Ismail said he arranged bilateral and multilateral loans to help cover the financial gap.
In his past stints as finance minister, Mr. Dar was known for supporting the value of the rupee by intervening in the market. The rupee, one of the worst performing currencies in the world this year, gained in trading on Monday. The rupee has fallen in value by around 25% against the U.S. dollar since the current government took power in April.
It isn’t clear how a move to prop up the currency can be pulled off now. Under the terms of the IMF program, Pakistan agreed to let the market determine the exchange rate. Foreign-currency reserves cover less than two months’ worth of imports, giving the next finance minister scant leeway to support the rupee.
On Saturday, the World Bank said it envisaged lending $2 billion to help Pakistan deal with the floods.
Mohammad Sohail, chief executive of Topline Securities, a Pakistani stockbrokerage, said that as well as reacting to the news of Mr. Dar’s pending appointment, the rupee was gaining Monday as a result of crude oil prices falling in recent days, as well as the prospective World Bank loan.
Mr. Sohail said Mr. Dar would become Pakistan’s sixth finance minister in the last four years, a turnover rate that added to the country’s economic uncertainty.
“I think that having consistency of policy is more important than who is finance minister,” said Mr. Sohail. “For a country like Pakistan, where there is political instability, some economic stability is important.”
Pakistan has foreign debt of $99 billion, of which $10.7 billion is owed to the Paris Club of lenders—led by Japan—which is owed $5.4 billion.
Mr. Dar has been a close adviser to the Sharif political dynasty since the 1980s and his son married into the Sharif family. He left Pakistan in 2017, while there were legal proceedings under way against him in an anticorruption court. Mr. Dar denies any wrongdoing and said he left to seek medical treatment in London. The court subsequently issued arrest warrants against him. Last week, the courts suspended the arrest warrant against him until Oct. 7, which Mr. Dar has said will enable his return.
Mr. Dar’s return to Pakistan, where he says he will seek to get the case dropped, is seen by political analysts as a test of the attitude of the courts for the possible return of Mr. Sharif, the ex-prime minister and older brother of the current premier. The older Mr. Sharif has also been living in exile in London after a conviction in a corruption court. He has similarly been declared a fugitive by the Pakistani courts. Mr. Sharif denies any wrongdoing, saying that the case against him was politically motivated.
Write to Saeed Shah at [email protected]
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8