EDITORIAL: Tomorrow Pakistan Day will be celebrated with traditional fervour and zeal and as the country approaches its 75th birthday (on 14 August) there is a serious shortfall in the realization of Quaid-e-Azam Muhammad Ali Jinnah’s vision and the expectations of hundreds of thousands who sacrificed their lives to create Pakistan of where the country should have stood today not only within the comity of nations but also with respect to the access to basic essentials by the people. Issues identified through studies/reports by domestic and international consultants decades ago have been largely ignored and today have reached a critical point.
An example includes the population explosion that continues unchecked and which makes any rise in budgeted social sector allocation insufficient to meet the needs of a rising population — social sectors that include education and healthcare.
While Prime Minister Imran Khan’s Sehat Sahulat Card envisaging free in-patient care up to a certain amount for each Pakistani is rightly hailed as a game changer, yet there are concerns that need to be dealt with in light of an actuarial analysis carried out by the German GIZ and International Labour Organization’s Impact Insurance in April 2019 with the following findings: (i) admission rates were very low not only in comparison to developed countries but also in comparison to baseline Survey in Pakistan. The obvious conclusion was that there is likely to be a substantial increase in future; (ii) projected claims costs and expenses (nominal terms) are very sensitive to the assumed increase in utilization, assumed increase in unit cost and fairly sensitive to the family size assumption. In this context, it is relevant to recall that in April 2019 (before the country went on the International Monetary Fund programme) inflation was less than 7 percent, rose to around 12 percent in 2019-20 and is projected to be higher than 8 percent in the current year.
Drug prices have sky-rocketed as have all other associated costs including the price of electricity; (iii) projected demographic changes — if they are small then there would be minimal impact on cost of claims and premiums, but evidence suggests otherwise; and (iv) the baseline indicative premium required from the projection model is 1,755 rupees per family per annum for 2019-21 — an amount that without doubt would need to be upgraded. In other words, an actuarial study is urgently required to ensure the Sehat Sahulat Card’s financial sustainability.
Pakistan was also warned decades ago that by 2025, we will face an acute water shortage and it has since been reported that Pakistan can only store 10 percent of the average annual flow of its rivers which is far below the world average storage capacity of 40 percent. Pakistan, a recent study further noted, was a water abundant country with almost 6000 cubic metres per capita in 1960 but is now a water-stressed country with 1017 cubic metres per capita. In this context, it is relevant to refer to the Monetary Policy Statement dated 8 March 2022, which states that “agricultural prospects have somewhat weakened, with key inputs such as fertilizer off-take and water availability during the Rabi season lower than last year.”
Decision-making by a previous administration(s) has been invariably challenged by its successor which has unfortunately led to litigation in courts abroad in which Pakistan has been penalized to the tune of hundreds of billions of dollars for breach of contract. In addition, by granting exemption from adhering to Public Procurement Rules Authority each subsequent administration has accused its predecessor(s) of corruption and nepotism at great cost to the national exchequer.
State-Owned Entities (SOEs) have been abused as recruitment centres and pledges to appoint its head on merit to turn it around have not borne fruit. The three white elephants — Pakistan Steel Mills, Pakistan International Airlines and Pakistan Railways — continue to drain the treasury to the tune of hundreds of billions of rupees. And this in spite of the manifesto promises by the incumbent government as well as its predecessor, promises that were made part of the agreement with the International Monetary Fund but remain unmet to this day.
The performance of the energy sector remains appalling and while a part of the reason lies with contracts signed that favour the Independent Power Producers rather than the general public yet inherent issues remain including a burgeoning circular debt (around 2.3 trillion rupees today) as receivables continue to sky-rocket. Disturbingly, the past three years have also been witness to failure of the Ministry of Energy to import RLNG on time that has been at the cost of the public as well as the productive sectors.
While government after government has been emphasizing the need to make the tax structure more fair, equitable and non-anomalous yet to this day the reliance on indirect taxes (and import taxes in particular), whose incidence on the poor is greater than on the rich, remains.
There are issues pertaining to the budget-making exercise which over decades has evolved into ever-rising deficits, a highly inflationary policy, funded by borrowing domestically and from external sources, with an ever-rising reliance on commercial borrowing from abroad (at higher costs and small amortization period). This trend has by now become unsustainable which partly accounts for the massive shrinkage of Pakistan’s negotiating leverage with donors — bilateral and multilateral. Today a budget is not expected to be relevant for more than a week, if that, after it begins to be implemented with the administration forced to adjust downward the Public Sector Development Programme (PSDP) outlay to take account of a higher than budgeted item under current expenditure with obvious negative consequences on growth and deficit. It is therefore evident that there is an urgent need for all political parties and players to agree to deal with these issues in a comprehensive and sustained manner and while it is understood that in a democracy each political party proposes a different route (policy options) to achieve the same objectives yet a consensus on issues cited above is not only possible but critical to the economic health of the country as without a strong vibrant economy the country cannot be truly sovereign.
Copyright Business Recorder, 2022
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