If the economic managers of Pakistan are to be believed, then “all is well” and the country is headed toward a brighter future. While official figures claim that inflation is well under control and investor confidence is looking good in a declining interest rate environment, a closer look at reality depicts shoddy economic governance.
Even as oil trades at historically low prices, Pakistan faces a steep budgetary deficit, endless borrowing from global institutions, falling exports, high unemployment rate and industry shutdowns due to pervasive energy shortages.
Someone must pay for this underperformance of the economy — and Pakistan’s Finance Minister Ishaq Dar believes to have the right solution for this issue. The recently approved mini-budget in the form of new regulatory duties on a wide range of goods to overcome a massive revenue collection deficit clearly demonstrates shortsightedness of the government.
As done previously, the authorities have resorted to more indirect taxation and penalizing certain sectors even further, rather than taking brave steps to counter the perennial problem of broadening the country’s tax base. The failure to take necessary measures to remove structural weaknesses and build a solid institutional mechanism for tax collection is likely to dent economic growth prospects as consumers lose purchasing power and development expenditure is curtailed.
Despite tall claims of an almost miraculous turnaround, the economy is a story of misplaced priorities and gross economic mismanagement.
Instead of focusing on investments to promote manufacturing and agriculture in the country, the government remains obsessed with grand projects that do not improve the basic living conditions of the masses. It has shamefully chosen to prioritize the establishment of a theme park and metro train system over other key areas. Such decisions reflect the apathy and oblivion of government to ground realities of Pakistan that demand higher budgetary allocations to education, health and other ventures for job creation for sustainable economic development of Pakistan.
Besides the tax collection challenge, there is also a need to undertake massive reforms for revival of public sector enterprises. These overstaffed, inefficient and corrupt organizations have been bleeding the country’s economy for long now.
It is about time that the government fulfills its promise of restructuring or selling off these white elephants that magnify fiscal deficits. So far, the progress on reform agenda of these enterprises has been painfully slow in the face of massive political opposition — the privatization of PIA and Pakistan Steels has potentially been delayed till 2018.
The government has also been unable to improve the efficiency of power and distribution sector that is causing huge losses and continued energy shortages.
The government must realize that such ad hoc policies do not fix complex economic problems. This approach to governance does not offer sustainable solutions, as it does not attempt to look at the root causes of problems. For stable economic growth, Pakistan desperately needs to improve its tax administration structure and support growth of the manufacturing sector.
