Pakistan at age 100

World Bank report titled "Pakistan@100 Growth and Investment" launched at a two-day event in Islamabad addressed by several cabinet members, including the Prime Minister and senior World Bank officials, notes Pakistan's potential in various sectors (the target) and the situation today. The first and second chapters urge the government to achieve a 1.2 percent population growth rate (as opposed to the 2.4 percent in 2017) with a focus on informed parenthood and on women (education, reproductive health, child development and health) and early childhood development with a focus on health and nutritional programmes (given that stunting of under 5-year olds is as high as 38 percent) through cash transfers to the poor and vulnerable. The Benazir Income Support Programme (BISP) transfers cash to the poor and vulnerable (beneficiaries selected scientifically to the satisfaction of multilaterals including the World Bank) - a programme that may be expanded through higher annual allocations. In this context, one would urge the government to consolidate all existing state-run charitable institutions engaged in cash transfers to the poor (announced by the Khan administration though not yet implemented) and subsidies extended by various sectors, including energy subsidy to those who use under 300 units per month. This would enable the Khan administration to widen the programme as and when resources are available after the government has dealt with the existing macroeconomic instability through structural reforms.
The report further maintains that four groups are impeding growth in Pakistan notably civil servants, landowners (read agriculturists), industrialists and the military. In an obvious attempt to make the identification of these influential groups less controversial the Bank refers to a study by Husain 1999 that argued "that there exist at least four influential groups that gained power through historical events and continue to leverage their influence on the political system for personal gain." Civil service reforms have been drafted and finalized by Dr Ishrat Husain and while details have not been shared with the public yet the Prime Minister's statement that he would protect bureaucrats from political pressure one day and that a bureaucrat must necessarily respond to a member of an assembly the next followed by the transfer of DPO Pakpattan and IG Islamabad have confused and dismayed many.
Landowners inordinately represented in our assemblies do not pay income tax, not even close to what is paid by the salaried class or industrialists. Agricultural income tax remains within the purview of the provinces as per the constitution and while provincial governments have increased their revenue from sales tax on services yet they have done little to compel the rich farmers to pay a tax commensurate with their large net income.
Industrialists, regarded by the current administration as the engine of growth, are receiving special fiscal and monetary incentives as well as reduced tariffs in order to be able to compete with their regional peers - incentives which have raised the budget deficit in recent months whose negative impact on inflation is being faced by the poor and vulnerable. One would have hoped that the Khan administration had begun the process of reform through eliminating market distortions (and the number of cartels and other market imperfections that prevail need to be dealt with), distortionary tax system that provides firms operating in the informal sector to remain outside the legal economy, regulatory bottlenecks impeding development of sectors, including IT sector, as noted in the World Bank report.
And needless to add, the Kashmir dispute and conflict on our Western borders with Afghanistan are historical events that preclude any reduction in military expenditure.
The authors of the World Bank study do not prioritize their recommendations given the state of the economy today. Human capital investment and child development, close to the heart of the Prime Minister, are long-term objectives and given the state of the government's finances today unlikely to receive the amount required. The structural reforms have so far not been considered by the present government. One would of course hope that the Prime Minister compels the chief ministers of Punjab and Khyber Pakhtunkhwa, the two provinces where PTI is in power, to begin to levy a tax on the income of the rich farmers that is comparable to what is being paid by other high income groups. And pro-industrial policies must focus on establishing an enabling environment rather than extending fiscal incentives that the government can ill afford at the present time, though they may be considered as and when macroeconomic stabilisation has been achieved.
To conclude, the government needs to establish a time bound list of priorities given its existing (declining) and projected revenue streams (one would hope that these are more realistic than at present) and expenditure needs to be curtailed to reduce the budget deficit and bring it to sustainable levels. Disturbingly, six months into its tenure, the Khan administration has neither focused on reducing the budget deficit nor on sequencing priorities with, unfortunately, the focus on the Prime Minister's political agenda including houses for the poor, as opposed to dealing with the ongoing economic impasse.