Ahsan Iqbal, Central Information Secretary, PML (N) condemned the World Bank's statement, contained in the Economic Outlook 2009, wherein it is stated that sending the package of legal reforms to the parliament or submitting them for the next fiscal year "maybe subject to changes in the parliament that might bring undesired consequences."
Few would challenge the thrust of Iqbal's argument and one would hope that the relevant staff member(s) of the World Bank are held accountable for this statement and that, unlike the case of the United States holding its junior staff responsible for the Abu Ghuraib abuses on Iraqi prisoners, those held responsible in this instance are the ones who signed on the document.
Such a faux pas on the part of the Bank is no doubt reminiscent of the Musharraf era, during which the parliament was either routinely bypassed at worst or rubber-stamped whatever Musharraf wanted at best. It is indeed ironic that an institution like the World Bank, engaged in strengthening democracy in this country, so openly flouts democracy's basic tenets, accepted world-wide: that parliament is supreme. Iqbal also clamoured for a public apology from the World Bank and one hopes that this would be forthcoming promptly.
In this context, it is gratifying that Finance Minister Shaukat Tarin has publicly stated that the Finance Ministry is preparing a rejoinder to the World Bank. Unfortunately, however, he appeared more focused on the report's failure to include the updated statistics provided by the government, rather than taking exception to the report's reference to the country's parliament. Be that as it may, one would fully endorse the World Bank report's concerns with respect to 'revenues continued under-performing in the first two months of 2009/10.'
An increase in domestic revenue generation is the only policy option that has the capacity to take this country out of its inordinately heavy reliance on foreign assistance. The World Bank report reveals that the "Federal Board of Revenue (FBR) tax collection, during July-August 2009, increased only by 3.6 percent compared to the 19.5 percent required to reach the annual target."
And this is partly accounted for by the failure of the government to show progress on revenue reforms in the first quarter of 2009/10, owing to what the report states are "vested interests and lack of political will." No one can challenge this assessment as the general public is fully cognisant of the fact that government after government has failed to impose a tax on the income of the rich landlords because this group is heavily represented in the country's parliament.
Be that as it may, the World Bank must also be aware of the fact that the executive within a democratic dispensation cannot simply restructure the tax collection agency according to its dictates, without going to the parliament. In its report, the World Bank admits that "the long over-due restructuring of the FBR, which was launched at the beginning of 2009, was reversed in May owing to a court case by the customs group, which opposed the reform."
It maybe recalled that the customs group had a legitimate case against the restructuring plan, namely that those who had opted for serving in the customs department after passing the gruelling CSS examination had done so based on an assessment of the opportunities it provided at the time. The World Bank, claiming international experience as its strength, must take responsibility for failing to devise a restructuring mechanism that would have taken appropriate note of the concerns of the customs officials.
The critical lessons learned against this latest episode with respect to the government's dealings with International Financial Institutions (IFIs) are the same that this paper has been proposing since the advent of democracy in this country last year: increase tax-to-GDP ratio and reduce expenditure to have sustainable budget deficits based on indigenous resources.
In addition, the practice of senior bureaucrats working for the IFIs to routinely be granted an audience with the President, the Prime Minister as well as other members of the cabinet must be discouraged. They must meet their Pakistani counterparts which, at the highest level, must be the Secretary of the ministry.