EDITORIAL: It’s been a while since Pakistan got to that point in the debt cycle when the fiscal squeeze explodes across sectors and sends all important indicators – poverty, unemployment, discontent, etc. – tumbling. And finally it’s started showing in the numbers. That’s why the country’s drop to the very bottom of the latest UN Human Development Index (in its 2023-24 report) is not exactly surprising, but it is still very shocking.
The Index measures achievement in three aspects of human development – “a long and healthy life, access to education, and a reasonable standard of living”. And the fact that Pakistan now falls below countries like Haiti and Zimbabwe, though a terrible reflection on present state of affairs, is still only half the story.
The government has no money to address this collapse; and it’s not going to have any for a long, long time. As former minister of state for finance Dr Aisha Pasha very rightly pointed out, after provinces take their cut under the NFC award, the government does not even have enough money left to service the interest on the debt. And that makes it much, much worse.
She was also right to mention that “poor people have borne the brunt of economic reforms in the past two years, which has to be stopped. It is high time that the elites now take a hit”. This particular problem – successive administrations’ shameless reliance on middle- and lower-income groups for most taxes – has worsened Pakistan’s human development slide every step of the way.
And there isn’t much to show that the thinking at the top has changed. Because when the new finance minister finally talked about taxing the big fish who have never contributed to the exchequer only because of their political contacts and nuisance value, the only thing people saw was the prime minister slowly starting to clip his wings.
The government must understand, especially as it prepares to negotiate another IMF programme, that the harsh “upfront conditions” must not be piled on the working class alone. If the trend of endless indirect taxes, which hurt the poor more than the rich, continues, then the have-nots will be forced to take to the streets in (possibly) violent protest.
Let there be no mistake. That is, without a doubt, the next stop in the debt cycle. The global human development index has recovered to pre-Covid levels, even though inequality has risen. But Pakistan has moved the other way on the graph.
These are ominous red flags that the government of Pakistan, regardless of the party in power, has always brushed aside. Yet the people have continued suffering; to the point that most of them enjoy a quality of life that is only better than the world’s war-ravaged regions.
Once again, there is no money to deal with this. Any relief will have to come from the IMF in terms of looser subsidy arrangements that are targeted and monitored. And that will only happen if the government is able to generate equivalent – preferably more – fiscal space, which is not possible until somebody does the right thing and taxes the big fish.
Copyright Business Recorder, 2024
Comments
Comments are closed.