Finance Minister Ishaq Dar’s press conference on Friday left observers nonplussed because it did not contain any new announcement. The lack of new information made it painfully obvious that Senator Dar, who had been inducted in the Federal Cabinet so that he would tame the inflation genie, lacks any clue about what to do about the economic problem that Pakistan faces. It will not cut it to say that the economy was doing well back in 2023, and that the PTI under Imran Khan messed it up. That underlying can be considered accepted, when the reasoning for the PML(N) being entrusted with the government, and it was reiterated by Senator Dar’s appointment as Finance Minister. Perhaps most damning is that amidst all the turning over of past laurels, there was no indication of the government’s future plans.
Two things are causing much uncertainty, over and above the horrendous inflation figures. First, there is no clarity on the IMF programme. Senator Dar’s assurance that an agreement is about to be reached is only given credence as far as the listener is willing to believe. Previous assurances came with as much assurance, and so far have not been fulfilled. The other thing is uncertainty about where the rupee, and hence future inflation, is heading. Attempts to minimize the level of inflation are both wrongheaded and callous. Core inflation is now twice what it was in 2008, when last the country faced a crisis of such magnitude.
One of the main problems that country is now facing is that it no longer believes Senator Dar. There may be some dispute over whether he is deliberately trying to misguide, or is simply out of touch with reality, but no one believes him. The problem is that panic is beginning to set in. This will lead to skewed economic decision-making at the micro-level of individual businesses and households. When that happens, such events as a run on the banks, or the setting in of hyper-inflation, start to happen. What is also beginning to cause concern is the silence of the Prime Minister. Statements by the Finance Minister or the State Bank Governor will no longer suffice to calm the markets. The head of the government must step up and take the nation into confidence. If he is trying to escape the political fallout, he should be aware that his silence will not win him immunity.
