Pakistan Finance Minister Resigns as Sharif Gov’t Faces Imran Khan’s Scorn Over Inflation

Pakistan has been facing the threat of a default on its foreign debt due to dwindling foreign exchange reserves. The coalition government led by Prime Minister Shehbaz Sharif has raised fuel prices at a record level since it took the reigns in April, triggering severe criticism from the country's former leader Imran Khan.

Pakistan’s Finance Minister Miftah Ismail announced his resignation late Sunday, as the governing Pakistan Muslim League-Nawaz (PML-N) is attempting to secure its support base ahead of the general elections.

Ismail said that he resigned as finance minister to PML-N chief Nawaz Sharif in London and will tender a formal resignation upon reaching Pakistan.

Meanwhile, Nawaz Sharif decided to appoint exiled party politician Ishaq Dar as Ismail’s successor.

The party replaces Ismail weeks after he successfully secured the release of $1.1 billion from the International Monetary Fund (IMF) by opting for an inflationary path to stabilize the cash-strapped economy. The inflation rate in Pakistan accelerated to 27.3 percent in August — a 47-year high.

The IMF in its report, in the first week of this month, warned that high food and fuel costs could trigger "social protest and instability" in the cash-strapped country.

Maryam Nawaz, daughter of Nawaz Sharif, who holds the post of vice president in the party, went public on several occasions criticizing Miftah’s economic policies.

Nawaz Sharif has told party politicians, including Prime Minister Shehbaz Sharif, that the party has “lost political capital” and that Ishaq Dar should work to regain it.

However, economists are raising concerns over the return of former finance minister Dar as finance minister.

Shahrukh Wani, an economist at the International Growth Centre at Oxford University, said that Dar was a bad finance minister the last time around, leaving the country at the gate of the IMF by the end of his tenure.

“With the current macro environment, the consequence of his typical economic management will be much worse for Pakistan,” Wani tweeted.

The economist blamed Dar’s idea of growth — borrowing for a short-term economic boom and subsiding imports via an overvalued currency — for Pakistan’s “stupid boom-bust cycle.”

However, bringing Dar to the helm to win “political capital” is an indication that the Sharif government would take an expansionary economic policy with an increase in populist measures.

PML-N had lost the provincial elections in its stronghold Punjab weeks after it wrestled power from Imran Khan amid a parliamentary vote of no-confidence.

PTI leader Imran Khan has been raising the issue of "unbearable inflation" in every public rally held since April, demanding snap elections.