he continuing economic difficulties of Pakistan are making the lives of common people miserable. The seventy-two-year-old Muhammad Ishaq Dar, the financial wizard of the ruling party, returned to Pakistan on September 27 after five years of a self-imposed exile in London.

Having taken oath first as a senator and then as the federal finance minister (for the fourth time), he appears to be uneasy after his recent visit to Washington. His initial confidence in his ability to fix the economy appears shaken after meeting the global lenders.

Although Dar claims to be vastly experienced in dealing with the international financial institutions, in the last five years things have changed substantially. His traditional approach to managing the economy, many experts warn, will no longer be effective.

Under the four finance ministers of Pakistan Tehreek-i-Insaf’s (PTI’s) the country not only became burdened with huge debt, it was also pushed towards high inflation and unemployment, besides recording an unprecedented fall in foreign direct investment (FDI), historic high policy rates and low GDP growth. After the regime change in April 2022, the second time finance minister, Miftah Ismail, added to the economic misery of the people.

During his five months in office, he paid more attention to meeting International Monetary Fund’s (IMF’s) conditions than seeking justified waivers. There was no imminent threat of external default as repeatedly claimed. The country has a strong asset-base to mitigate such a risk. Miftah Ismail’s actions not only aggravated the financial woes of the ordinary citizens but also compromised the political capital of his party to the extent that it could not win a single seat in the recent National Assembly by-elections.

Apart from the imprudent decisions of the previous government, geo-political tensions like the Russia-Ukraine war, the domestic political instability and a legacy of macro-economic imbalances and unsustainable policies are the source of our current economic mess.

The economic immaturity and inconsistency are evident from the fact that in the last five years (2017-2022), Pakistan has witnessed the appointment of six finance ministers — each employing a different approach to handling economic issues at the cost of consistency in policies, a prerequisite for attracting investment. Unfortunately, a majority of them lacked relevant qualifications and experience.

Our rulers have hardly bothered about economic hardship of the masses, assigning priority instead to personal gains. The most apt example of this was the violation by the PTI of the agreement with IMF in extending non-funded subsidies on petroleum products to secure political mileage.

The biggest challenge for Dar currently is to scale down the pace of inflation and provide an enabling environment for businesses to sustain and flourish. It is apparent that the major contributor and key trigger for inflation are high fuel prices.

The resumption of the Extended Fund Facility (EFF) by the IMF during Miftah Ismail’s tenure was subject to the removal of unsustainable subsidies that the government agreed to withdraw and imposing petroleum development levy that was earlier agreed to by the PTI government. The IMF’s country report following the approval of the EEF facility of $1.1 billion, confirmed Pakistan’s commitment to impose a monthly petroleum levy increase of Rs10 per litre for petrol and Rs 5 per litre for diesel oil on September 1, followed by an increase of Rs 5 per litre per month for both fuels until it reaches Rs 50 per litre by January 2023 and April 2023 for petrol and diesel, respectively.

The decision by the PTI to seek political mileage placed Pakistan in a position where the successor government was forced to agree to an IMF-imposed increase in petrol prices, imposition of petroleum levy and new taxes of approximately Rs 2,000 billion to obtain a $1.17 billion loan.

The situation worsened further when unprecedented floods hit Pakistan, resulting in financial losses estimated at more than $30 billion. In the backdrop of this catastrophic situation, Pakistan has raised an SOS to the global lender to ease out the terms attached to the IMF’s programme. At the same time, the government is looking forward to rescheduling its debts, other than commercial loans, for creating some breathing space for its dwindling reserves.

An IMF team will be visiting Pakistan next month to meet Pakistani authorities for the next review. The IMF has already indicated that it might need to update its numbers. However, they are looking forward to the damage/ loss assessment by the World Bank and United Nations Development Programme (UNDP) that will help them estimate the impact on the economy and the society.

During his visit to the United States and meetings with officials of the World Bank, the IMF, and the Asian Development Bank, Dar apprised them of the challenges Pakistan is facing because of the catastrophic floods. Dar worked hard to generate support for recovery and rehabilitation. He urged the IMF to tailor its response to help Pakistan in combatting the economic and social challenges arising out of the global geopolitical situation and climate changes.

President Masatsugu Asakawa of the Asian Development Bank (ADB) assured him that the ADB will continue to support Pakistan and facilitate fast-track approval and disbursement under the Balochistan Rural Development and Community Empowerment (BRACE) programme amounting to $1.5 billion.

The minister also led Pakistan’s delegation to a high-level meeting on the flood situation — an event organised by the World Bank. The session was attended by senior representatives of major bilateral and multilateral partners and donors where initial findings of need assessment for Pakistan vis-a-vis flood disaster were presented. These findings were jointly prepared by the ADP, the UNDP, the European Union (EU), the World Bank and the government of Pakistan.

All these initiatives will benefit us in the future but the biggest current challenge for Dar is to scale down the pace of inflation and provide an enabling environment for businesses to sustain and flourish. It is apparent that the major contributor and key trigger for inflation are high fuel prices. The impact of high prices in the global market, mainly due to geopolitical conflicts, is aggravated by a weak rupee and topped by the rising petroleum levy agreed with the IMF.

The recent announcement regarding the petroleum prices is indicative of the fact that Pakistan has not been able to get any respite from the IMF. The levy has been significantly increased from Rs 32 per litre to Rs 47 per litre – a 46 percent raise. This implies that the relief, which could have otherwise been extended to the public, has been consumed as a revenue-generating measure.

Although the target Rs 50 per litre target was to be achieved by January 2023, the accelerated pace of micro- and macro-economic adjustments has proven detrimental to domestic economy where large, medium and small businesses - across the board - are finding it difficult to align themselves with new cost structures.

A high tide of inflation leading to hyper increase in energy and food commodity prices has almost drowned the lower-income groups. However, in the current situation, the government appears least interested in relieving the masses from inflationary pressure. Rather it is focused on generating revenue at a rapid pace without taking cognisance of the fact that its political equity is amortising at the pace identical to depleting the people’s purchasing power and decreasing the level of economic activity in Pakistan.

Abdul Rauf Shakoori is a corporate lawyer based in the USA

Dr Ikramul Haq, an advocate of Supreme Court and writer is an adjunct faculty at Lahore University of Management Sciences (LUMS)