EDITORIAL: One of the most challenging and thankless jobs under the current economic conditions in Pakistan is that of the federal finance minister in view of the facts that economic growth barely covers the population growth, inflation is high, fiscal structure remains unsustainable, and the balance of payment conundrum continues to simmer with an unprecedented hardening of International Monetary Fund’s (IMF’s) stance.
It is, therefore, akin to be in the proverbial ‘hot seat’ that continues to heat up further because the person in the seat remains hamstrung by the influential elements and circumstances that compromise the needed efforts to tackle the mess in the economy.
Successive finance ministers have faced the wrath of media and public and agonizing pressures from the interest groups and powerful elements. The incumbent finance minister, too, faces an identical ordeal.
The budget passed by the coalition government is widely and vehemently assailed by all across the board, including the business community and the general public, especially the urban middle class; and rightly so in view of the inordinate burden the government has placed on existing taxpayers while at the same time it has cleverly and deviously insulated the officials of the ‘State’ from additional tax measures and showered hefty increases in allocations on the officialdom.
One must acknowledge that the finance minister and his team had little wiggle room to play and had to do away with the sales tax exemptions on a large list of items. The normalization of income tax for various sectors (including exporters) too had to happen.
Having said that, there are certain areas where the government could have been more thoughtful than they have in the budget.
Letting the higher burden fall disproportionately on middle income salaried and non-salaried individuals where the effective tax rate for highest slab ranges between 39-49 percent cannot be justified.
During the last two decades or so, technocrats of different hues and shades, elected on technocrat seats in the senate, have been installed as finance ministers. They have been found to be beholden to the party leader for this opportunity to upgrade their curriculum vitae and standing in the international world of finance.
The party head, however, has scant understanding of economics and finance. Although he does not fully appreciate the intertwined fiscal and monetary linkages, he is extremely sensitive about the interests of his party’s constituents whom he often rewards with relief through warranted or unwarranted reductions in prices of essential items.
Therefore, what is missing in almost all the finance ministers in the last more than two decades is the absence of a personality that has the stature to say ‘no’ to the power corridors and also who enjoys the confidence of his boss (Ishaq Dar being the notable exception who enjoyed full confidence of Nawaz Sharif).
We have had two finance ministers in the past, both under martial law administrations, who possessed this standing and stature: Muhammad Shoaib and Ghulam Ishaq Khan were the ministers of finance in the governments of Field Marshal Ayub Khan and General Ziaul Haq, respectively, who were known for resisting undue pressure and saying ‘no’ to their bosses on matters of significance to the economy, including the patronage of select groups.
To elucidate this point, it is worth recalling an incident that would demonstrate the kind of stature and confidence of his boss and the ‘powers that be’ that a finance minister needs to enjoy to be able to deliver on the corrective steps and reforms that are direly needed to pull the economy out of the morass.
During the Ziaul Haq era, all banks in the country operated in the public sector as they had been nationalised by the Zulfikar Ali Bhutto government on 1st January 1974, i.e., prior to Ziaul Haq’s martial law on 5th July 1977. During the 1980s, the Pakistan army decided to have a bank of its own by the name of ‘Services Bank’.
A CEO for the bank was hired, the State Bank of India building in Lahore was vacated and handed over to them for setting up their office, and cars that had been impounded by the customs for various irregularities were released to the proposed bank for their staff.
This newspaper broke the story that the army is setting up a bank. Both the then governor of State Bank of Pakistan A.G.N. Kazi (who under the law had to issue a licence to operate a bank) and the then Finance Minister, Ghulam Ishaq Khan, were completely unaware of any such move.
Once it came to their notice both these gentlemen opposed this move tooth and nail. Their argument was that banking is nationalised and unless the law is changed the setting up of this bank cannot be allowed. They dug in their heels and the decision to establish the bank had to be shelved.
Be that as it may, in days of tough economic conditions, a finance minister is required to stand up and oppose the Prime Minister and other powerful circles if their demands are against the wider economic interests of the country.
Apparently, Aurangzeb and his team found it hard to say ‘no’ to the MNAs from ruling PML(N) and its coalition partners on the PSDP (Public Sector Development Plan) allocations for schemes proposed by legislators, doing away with the category of non-filers being recognised when in fact they are tax dodgers, generous increases in the salaries of government employees whether retired or serving and, creating a chasm between the officials of the state and the rest of the people by according them exemptions from sacrifices that are being asked of the rest of the nation by imposing exorbitantly high taxes such as the surcharge on salaried and non-salaried tax liabilities and sales tax on packaged dairy products, including baby food and infant formulae.
All these measures are going to hit the people at large and not just the rich class.
The selective application of demand for sacrifice particularly when there is nothing tangible in the Finance Act on lowering the government expenditure except for general statements about closing departments on devolved subjects and reducing the number of ministries/divisions is bound to create despondency amongst the masses.
Copyright Business Recorder, 2024