The newly appointed Advisor to the Prime Minister, on Finance and Economics, Shaukat Tarin, banker by profession, has sounded optimism on the current economic situation. Current crises need good and encouraging sound bites, not the usual blame game. These crises can be a blessing in disguise, if the people in power want to and have courage to correct the system.
Last week I received an invoice from car tracking company, the jolt I got was not from the yearly fee, but the sales tax charges of 21 percent. Outrageous. Shaukat Tarin in his press conference mentioned that the whole system of the country's economy is financed by merely less then 10% of the total population. Only 16,500,000 persons out of 165,000,000, depending on which number you take for consideration regarding the total population of the country, are nurturing and feeding the rest of the country.
This includes financing, defence - finance the world's seventh largest armed force, infrastructure development, parliament and perks of its members, ministers and their entourage, law and order, Afghan refugees, and above all corruption. This is a matter of simple mathematics. We need to grow our resources and expand the tax network, not to tax the already taxed.
The idea of imposing indirect taxes is burdening the taxed class, because they are the one who make most of purchasing. Look at the utility bills starting from telephone bill, the consumers are paying CED, Withholding Tax, and some PTC Surcharge; electricity bill of KESC contains Electricity Duty, Income Tax, and General Sales Tax; whereas gas bill has Sales Tax in it. Not to forget my tracker bill, grocery bill, if affordable eating out, clothing, and any purchases I make have some type of levy on it. The combined effect of all these bills compounded the misery of the working class.
The electricity crises have driven the service provider, KESC, to increase the unit prices, which are already on a high side, compared to the rest of the world. The best way for KESC to increase its revenue is to control the line losses mainly due to Kunda system. Notice when you drive over the bridge towards Dr Ziauddin Road, on the left there is a police station and all the residential places have a variety of air-conditioners and blatant use of illegal electric connections.
The first and foremost thing to do is stopping the blame game and get out of the mode of doomsday scenario. Face the facts and start working from there. Then there is need to tackle the inflation, which is hovering around 25-30% range, again depending on whose assessment of figures you consider. I endorsed the view that inflation drives interest rate, and interest rates drive foreign exchange rate.
The State Bank has done its job by increasing the discount rate, but the fiscal side should have uninterrupted flow of supplies, which has had tempered the whole mechanism. Wheat and grains are staple in our economy, and are a major driving force of the inflation.
This has landed us on a runaway inflation train. The situation has been compounded by the run on the bank, which purely resulted from the rumour mills, coupled with the political leaders' urge to create sound bites for the media and their past behaviour.
We should remember the infamous 1998 action of the then government to freeze the foreign currency accounts. One of the responsible ministers from the government has to come forward and forcefully refute the rumours. Tarin has done so, but it was too little and too late.
The Advisor desires to increase the tax base and tax net; finally, there is someone who is making sense. The situation is the perfect time to bring the untouchable agri-sector into the tax net and the ever-powerful zamindars. These people have enjoyed the maximum of the country's wealth and contribute zero to the exchequer. It would be a breath of fresh air to the urban population, who is in no position to fight the current crisis on its own.
Everyone has to equally share the burden. People in power must realise that government works like a corporation, to make and maximise profits. It cannot survive alone on borrowed money all the time. Those who were funding our needs are already in dire straits. And to maximise profits the government has to increase revenues and lower the expenses, and increasing revenues are possible by increasing the tax network, not to place the burden on the already besieged minority of 10 per cent.
Not to ignore the capital markets in this crisis, I have to say this, 'take down this wall...' The brokers have made gains for a very long time, and now it is time to think. The time is ripe to streamline the stock markets. The market, by imposing limits, has contributed to aggravate the crisis.
It is against the norm of free market economy. Let it slide, some of the scrips have tremendous strength to pull the market to stability. I firmly believe that 'Truly great investors find ways to stay in business and, in fact, stay profitable during fluctuations - even especially miserable ones. The run on the bank and herd mentality of buying dollars can only be controlled by creating confidence in the country and that can only be done by deeds only.
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