Economic experts and former financial managers on Tuesday said that bad governance and the rulers' fixation to save their government rather then making efforts to salvage the fragile national economy has led to multiple crises in the country, namely fiscal, debt and energy.
"The steps of increasing tax net, overcoming energy shortfall by constructing water reservoirs and importing LNG, and improvement in governance will help overcome the prevailing debt crisis and would provide an opportunity to revive the economy," they said.
Former federal finance ministers Sartaj Aziz and Dr Salaman Shah, former commerce minister Humayun Akhtar Khan and former federal industries minister Jehangir Tarin expressed these views while addressing a seminar on economic crisis, which was organised by Aiwan-e-Iqbal here on Tuesday. Chairman Aiwan-e-Iqbal Arif Nizami was also present on the occasion.
Addressing the seminar, Dr Salman Shah blamed the present government's 'incompetent' economic managers for turning the robust economy, left by them, into unmanageable economy. He said these economic managers were more focused on playing the blame game and they lack a vision to move forward. "Pervasive ill-conceived policies and bad governance has dented the investors' confidence," he added.
According to him, the government was supporting its huge deficit by borrowing from the central bank rather opting for generating additional resources, which crowded out credit for the private sector. Dr Salman Shah was also critical of the 7th NFC Award, which in his opinion has destroyed the federal resources. He observed that the present government lack consistency in its policies; in almost three years four finance ministers; four finance secretaries and three Governors of State Bank of Pakistan (SBP) have changed.
To overcome energy crisis, he urged the government to adopt a five-year energy plan and as a first step the government should reduce line losses and control power theft. He said the country had a generation capacity of 20,000 MW, but at present only half (10,000 MW) the capacity was being tapped, as many power plants were not operational due to various reason. On the occasion, Sartaj Aziz said that Pakistan was facing multiple crises, adding that the fiscal side is the most troublesome.
He said non-development expenditures increased sharply in recent years. "Administrative expenditures have jumped to Rs 350 billion from Rs 146 billion and debt servicing touched Rs 800 billion from Rs 400 billion. In fact, all the economic indicators are alarming," he added. He was of the view that tax to GDP should be increased to 18 percent by tapping the potential of Capital Value Tax and enhancing excise and import duties on luxury items.
He observed that revival of the economy was still possible if the government musters the courage to increase tax to GDP ratio and the provinces have to play their part in this cause. He said in India tax to GDP ratio was 18 percent out of which 12 percent of the GDP comes from federal government and 6 percent of the GDP by the provinces. "In Pakistan, the taxes collected by the provinces are only 0.5 percent of the GDP. Resources provided by the federal government to the province should be linked with increased revenue generation," he added.
He was of the view that instead of privatisation, the government should restructure corporations. To overcome energy crisis, the government should consider the option of importing LNG. Jehangir Tarin was also of the view that tax collections was the key to the existing economic turmoil. He said the government had not shown the will to collect taxes, although the people were ready to pay.
He said the parliamentarians should set an example by paying taxes on all incomes, including the one they have kept in foreign countries. "Everywhere income generated by a citizen in foreign countries is taxable in home country but this is not so in Pakistan," he added
He also pointed out that Agriculture Tax was imposed in Punjab and Sindh on income generated from land holding of over 50 acres but the provincial governments did not have the courage to collect from the feudal. Humayun Akhtar observed that the present government did not have an economic policy and was only following the IMF policy. He said the government has violated the fiscal responsibility law, as its debt has crossed 60 percent of the GDP limit. LCCI President Shahzad Malik also spoke on the occasion. He said there was a need to launch a war against corruption.