Pakistani finance minister pledges to control inflation and cut interest rates
ISLAMABAD: Pakistan’s new Finance Minister Ishaq Dar will work to contain inflation and cut interest rates, he said on Wednesday, calling the rupee undervalued and promising a strong response to solve the South Asian nation’s worst economic crisis.
For the fourth time in office, the accountant has to deal with a balance of payments crisis, foreign exchange reserves barely covering a month of imports, historic lows in the rupee, inflation exceeding 27 % and the aftermath of devastating floods.
“We will control inflation,” Dar told reporters, referring to deep-rooted challenges ahead, in televised comments made after his swearing-in. “We will lower interest rates.”
He had a warning for foreign exchange speculators, saying the Pakistani rupee was undervalued.
“Our currency is currently not where it should be, it is undervalued,” said Dar, who is known to favor intervention in the foreign exchange market to keep the rupee stable.
“I hope the speculators will stop. I think they have already figured it out and we see the rupee going up,” he added. “No one will be allowed to play with Pakistani currency.”
A member of the upper house of parliament, Dar got the job after his predecessor, Miftah Ismail, became the fifth to resign in less than four years, amid continued economic turmoil.
The rupiah rose sharply ahead of his appointment and stocks responded positively ahead of Wednesday’s swearing-in.
The senior politician from Prime Minister Shehbaz Sharif’s ruling party flew to Islamabad on Monday night after ending a five-year self-exile in London.
In 2017 he faced corruption charges which he said were politically motivated, but last week an anti-corruption court suspended warrants for his arrest, allowing his return.
On Wednesday, the court extended the suspensions.
“I told the court that my passport had been revoked,” Dar said after appearing in court.
“I have not been able to travel for the past four years,” he added, describing the legal action against him as political victimization by Prime Minister Imran Khan’s previous government.
Khan’s party denies this.
Analysts say Dar’s key mandate is to halt inflation which stems mainly from his predecessor’s unpopular decisions to stick to the preconditions set by the International Monetary Fund (IMF), including the removal of subsidies from the IMF. Khan’s government.
Sharif’s coalition government says it inherited a crumbling economy after Khan was ousted in a no-confidence vote in April, a charge the former prime minister denies.
When the new government took power, the $6 billion IMF rescue package agreed in 2019 was in the doldrums due to the lack of an agreed policy framework.
Last month, the IMF’s executive board approved the seventh and eighth reviews of the program, releasing more than $1.1 billion.
The tranche, former finance minister Ismail said, is expected to be increased after Pakistan requested help to address economic losses estimated at $30 billion from the unprecedented floods.
The disaster could cut GDP growth below 3%, from an estimated 5% for the 2022-23 fiscal year, the government said.