PAKISTAN'S FAST EMPTYING COFFERS

FISCAL IMPRUDENCE, LACK OF STRUCTURAL REFORMS AND GEOPOLITICAL FACTORS HAVE PUSHED THE NATION TO THE BRINK OF ECONOMIC COLLAPSE

- HASAN ZAIDI

We have never defaulted in the past and we won't default now," asserted Pakistan's federal minister for finance Ishaq Dar on March 3, looking irritated at the persistent questions journalists were lobbing at him at a press conference. His irritation stemmed from ongoing speculation about the country's crisis-wracked economy; the latest blow dealt by credit ratings agency Moody's, which had downgraded Pakistan's sovereign rating to Caa3, signifying "increasingly fragile liquidity and external position" and a raised risk of default.

Dar painted an optimistic picture at the press conference, trying to assure those assembled that a long-pending staff-level agreement with the International Monetary Fund (IMF) was just round the corner, that bilateral funds would soon be flowing in to shore up the dangerously low foreign exchange reserves and that he had everything under control. Not many were convinced with his bluster. Since he took over the reins of the finance ministry in September-elbowing out fellow Pakistan Muslim League-Nawaz member, the Whartoneducated Miftah Ismail-Dar has seemed like a bull in a china shop. None of his boastful claims before he came into office that he would control inflation, renegotiate stringent IMF conditionalities and bring the plunging rupee back under Rs 200 to the US dollar-have materialised.

A FALTERING ECONOMY

If anything, Dar's blundering attempts to pull back processes put in place by Ismail have led to a faltering economy going from bad to worse. Inflation is at a historic high, with food inflation clocking in at over 42 per cent and transport inflation at over 39 per cent; an IMF tranche that was due last November is still in limbo while the government has been forced to accept all harsh conditions. The rupee at one point plunged to almost Rs 300 to the dollar before making a modest recovery.