Later today, the national budget for 2011-12 will be presented in parliament. Probably one of the toughest assignments that any Pakistan economic team has had. Never before has there been such a great need for belt-tightening, cost cutting and self-reliance. What stands before the present team, I believe, are the real, rational demands on the economy in the short term, a vibrant growth strategy in the longer term and on the other hand the lack of political will to address the real issues. An unenviable balancing act.
Self-reliance is without any doubt the most important. Once we committedly embark upon this journey, It will set the country on the path to achieving goals essential for development, Simultaneously the issue of debt-reliance, bludgeoning liabilities and the peoples’ demand for economic independence will find resolution.
The first step in this direction is revenue realisation. There is no doubt in any mind that the tax net is narrow. Pakistan’s tax-to-GDP ratio is said to be below 9 percent. The main victim of this net is the salaried class. A class that is already struggling under the yoke of inflation and the increased cost of living, education, medical treatment et al. It would be ludicrous to tax the already taxed. Government is therefore left with no real option but to expand the tax net. This is something that has been touted by successive governments for over a decade, with little or no progress in that direction.
In an economy rampant with tax evasion, from the top to the bottom, it is a daunting task. Expanding the net requires complete cooperation from all national stakeholders. Under Pakistan’s current diversionary political scenario this is not something easily achieved, making an onerous task even more difficult. I think even before discussing economic needs it is important to review where the country stands politically.
Point-scoring has obliterated the essence of Pakistan’s existence and the welfare of the people. Political jargon and the message to the people are directed not at solutions but at random finger pointing without even a complete understanding of issues. The message being conveyed, on the excessive multitude of electronic media channels in the country, is an attempt to mislead the illiterate part of the electorate, which unfortunately constitutes the majority. Half-stories built on a convoluted interpretation are continuously rammed almost like communist brainwashing in the height of that era.
Reality is a strange bedfellow. You can deny its existence till you are blue in the face but eventually it comes back to hit you. Look at the spin during the Musharraf decade when consumer finance ruled and people who were buying fans could suddenly afford air-conditioning. When push came to shove all of this evaporated and once the smoke screen lifted people were confronted by the fact that it was an ill-afforded luxury. It was trendy economics, immense damage be damned.
Musharraf had a distinct advantage, for the majority of his rule, but failed to capitalise on it. That of being able to implement necessary economic steps. His economic team had complete license and full support to proceed and they had no political opposition. Today the situation is different. The very vocal opposition, too, is a major deterrent in implementation of essential economic measures.
In my opinion, Pakistan’s economic woes can only begin to be resolved when the approach to this comes through the “one hand” panacea. By this I mean the linking of hands of all stakeholders towards achieving this goal. Perhaps some may think that it is too great a sacrifice. Let them not forget if it were not for Pakistan they would be nobody.
Today, when Pakistan is facing the trauma of insurgency and there is a rising national crescendo that Pakistan’s security and vital national interests can only be served by removing, or at least reducing, dependency on foreign assistance – it is of essence that politics takes a background. Only when this happens through one hand, will there be a tacit move in this direction.
Pakistan’s economic team has to set the ball rolling to achieve a growth rate of five-six percent over the five-year period commencing 2011. Other than improving the tax-to-GDP ratio, investment, local and foreign, must be addressed. The banking system is making enormous profits on lending to the government thus neglecting other sectors. Credit released to these other sectors is also mainly to the already deep pocketed sector while ignoring new entrepreneurs and venture capital requirements. SMEs, both industrial and commercial, are given a hard time to the point that many are just picking up their bags and moving. Take a plane to Bangladesh and you will see what I mean.
Yes, Pakistan is our zeal. If we are to abuse this privilege by indulging in self-serving politics that is rhetoric-based, then injustice is being committed. Pakistan and its people need to believe and trust the country. And national leadership must provide this confidence. In turn, the people must pay their due. In a few hours, we will know whether we are capable of this.
The writer can be contacted at imranmhusain@me.com