In other words, the country is on the verge of a sovereign default. This recognition is an admission for cure; it’s no sign of weakness. The IMF programme is just one step to begin the treatment that we fallaciously consider a remedy.
Unfortunately, however, we have been making this mistake over and over: as many as twenty-three times since the creation of this country.
The second corrective measure is to effectively undertake economic reforms. There are three fundamental economic reforms that as a country we do not want to implement despite our assertions to the contrary. These are:
Resilience, helplessness or loss of trust?–I
Documentation of economy;
Liberalisation of economy; and
Privatisation.
The average Pakistani is suffering primarily for the reason that his tax incidence is largely equal to a rich person’s as the majority of taxes are collected by way of indirect taxes.
Unless and until we document the economy and make a substantial increase in direct taxes and reduce the incidence of indirect taxes there cannot be any fiscal reform in the country.
Being a person who has dealt with this issue from all angles, it is this author’s view that the present political setup and the composition of the legislature are not tuned to this primary task. At present, the elite class is the beneficiary of existing policies that are duly supported by impractical economists.
What kind of autocratic system is required for this action is a question that does not have an answer; however, the time to think of any other alternative is over.
On the matter of liberalization, our neighbor next door ‘had always attracted criticism for over-regulations and ‘licence Raj’. Now countries such as Saudi Arabia, the UAE, USA, several countries from Europe and even China are investing in Indian companies. Let us review their recent history.
Dr Manmohan Singh, who was born before Partition in a small village known as “Gah” in Chakwal District, stated in a recent interview:
India’s state of affairs in the 1990s “India had an unsustainable fiscal deficit. Our central government fiscal deficit was as high as 8.5 percent of GDP.
India had an unsustainable balance-of-payments deficit. The current account deficit was close to 3.5 percent of GDP, and there were no foreign lenders who were willing to finance that deficit. Our foreign exchange reserves had literally disappeared, so we were on the verge of bankruptcy, and the nation faced an acute collapse of its economy. Foreign exchange reserves were no more than a billion dollars; that is, roughly equal to two weeks’ imports.”
What India did?
“We got the government off the backs of the people of India, particularly off the backs of India’s entrepreneurs. We introduced more competition, both internal competition and external competition. We simplified and rationalised the tax system. We made risk-taking much more attractive... [and] much more profitable. So we tried to create an environment conducive to the growth of business.
We removed a large number of controls and regulations, which in the past had stifled the spirit of innovation, the spirit of entrepreneurship, and restricted the scope for competition, both internal competition and external competition.
As a result, in the ‘90s, productivity growth in the Indian industry has been much faster than ever before. The role of government is not a government that will disappear. They share our public expenditure. Total national expenditure of India is only about 30 percent. It’s much lower than the United States’, much lower than the United Kingdom’s and many European countries’. We are not saying that the government will disappear.
We’re going to redirect this expenditure. The government will take a lot more interest in education, in primary health care, in environmental protections, in promoting research and development.
But the government will not be in the business of running industries and running trading enterprises. It is restructuring the role of the government, getting government out of activities where governments are not very efficient at doing things, getting government more actively involved where we feel markets alone cannot provide the necessary amount of goods to the extent that our people need — basic education, basic health care, environmental protection measures, basic social safety net. These are the things that we feel our country needs, and in a civilised society governments have a major responsibility to provide these basic public goods.”
The question is why don’t we look at what this Sikh sage from across the border has stated and why can’t we adopt the policies articulated and implemented by him in his place of birth as well—today’s Pakistan. Over the period of 75 years, especially in the last 20 years, our mantra of liberalisation of economy has further strengthened bureaucracy and bureaucratic control.
Insofar as privatisation is concerned, our political system is strongly characterized by sick mentality, to say the least. Pakistan Steel is a strong case in point. We have already wasted 1 to 2 trillion rupees in losses over the last forty years. This is in addition to non-utilization of precious land being wasted.
The aforesaid three factors have been specially identified for the reason that it is the author’s view that the present state framework with establishment in Islamabad and Rawalpindi, is not going to bring about any positive change. The other option is to let the common man gradually suck down in a quagmire of poverty and helplessness.
The elite classes, including a bulk of politicians, have already made their security arrangements outside Pakistan; therefore, they are not worried at all.
The areas comprising Pakistan are not prone to any revolution in the last 2000 years as rightly been described by Barrister Aitzaz Ahsan in his book “The Indus Saga” however this time history is going to be changed. Noted poet Faiz Ahmed Faiz had famously said: “Hum Dekhaingey [It’s inevitable that we shall see]”.
(Concluded)
Copyright Business Recorder, 2023
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