Considering the existential threat that terrorism is, it rightly featu4es prominently in any major address by the government, as it did in the Presidents speech to a joint session of parliament the other day. But terrorism is not the only problem facing the country, only the biggest. For second on the list is our floundering economy. It is a problem which does not quite have the same in-your-face immediacy as terrorism. But affects the teeming millions day in and day out with a relentless, soul-crushing consistency.
The five major issues which the President said required a consensus were the energy shortage, circular debt, taxation reforms, documentation of the economy and restructuring public sector entities. The first two are inter-related. The third and fourth are also deeply tied to each other. There is one thing, however, that all of them have in common: none of them can be solved without taking tough, unpopular decisions. We have an energy shortage not because we do not have adequate productive capacity but because we lack the capacity to produce electricity at a cheap enough rate. Rising fuel costs translate into higher tariffs in our thermal-intensive power profile. The populist political parties insist on power subsidies. That cant possibly go on. In fact, even more fiscal space needs to be saved up or perhaps even has to be diverted from the PSDP to remove the circular debt. All in addition to attempting to minimise transmission losses.
Our extremely small tax base, which has yielded one of the lowest tax-to-GDP ratios in the region, is a result of not so much as low tax rates (our top income tax slab is 20 per cent; at least some Americans would love to shift over) as much as it is of rampant tax evasion. Building up a database for that is a must. That is what the reform of the GST meant to do. It would not, as is irresponsibly being propagated, lead to a higher tax rate, but will make cheating on the existing tax rates tougher.
Our public sector entities are not just top-heavy but simply heavy. Period. Not just highly paid Vice Presidents who do nothing but battalions upon battalions of gardeners, cooks, the works, at organisations like the PIA or KESC.
A consensus over the phasing out of subsidies, reformation of the GST and rightsizing at the PSEs is way overdue. It is ironic that the President espoused these views in a house bereft of opposition members.
