Humpty Dumpty Economy

The annual budget has come and gone, to wherever budgets lacking vision, ground realities and with no chance of implementation end up. Usually in the waste-paper baskets of senior bureaucrats, or as lucre in the pockets of numerous lower level ones, or still more likely in the corner fish shop. As a serious document intended to alleviate the harsh economic realities confronting the people, it scores a big fat zero.

Our Humpty Dumpty economy has had many a bad fall, and the kind of cosmetic patching up our financial wizards are accustomed to, will simply not work this time. The only thing interesting for the viewers about this budget session was the somewhat melodramatic protest of the opposition on the floor of the House.

Otherwise, it was all business as usual: an irritating over-the-head ritual for the parliamentarians of mostly just going through the motions. Our elected representatives unfortunately lack any notion of economising or budgeting, being used to lavish lifestyles, which they refuse to give up as the economy is lurching along by printing billions of rupees daily. But putting the mint presses into overdrive has its own set of consequences, inflation being one of them. And this again hits the more vulnerable in the society.

O, I never thought I would one day wish for a Ghulam Ishaq Khan. The tight-fisted economic manager, one must hasten to add, and not the ambitious bureaucrat or an armed with 58-2-B autocrat of a president who would in his own way have a huge hand in derailing democracy many times over. Out of GIK, the money manager, you couldn’t get any extra change, regardless of how impressive the feasibility report on a project looked on paper!

In all the donkey years, GIK oversaw the budget, people listened closely and the document had some definite financial impact on the individual, for better or for worse. In later years, the budget was regularly reported to have been leaked, like examination papers, or crafted in connivance with the privileged few to make hundreds of millions from insider knowledge.

Later on came the age of the ‘mini-budgets’, which only caused financial disruption by increasing the prices of essential commodities and altering the priorities set in the annual budget in midstream. For some years now, we have become acquainted with the ludicrous ‘tax-free’ budgets, a misnomer if ever there was one. A glut of such ‘tax-free budgets over the years have caused prices to skyrocket, are now threatening hyper-inflation, and have left one-third of the country’s population below the poverty line.

So, any more of the ‘tax-free’ budgets, and we are done for. The issue is not new taxes. We already have a whole raft of them that do not get collected because, in cahoots with the bureaucracy that is supposed to collect them, our rapacious rich won’t pay up. The point has been laboured at before by most analysts, and for years, yet not much has been done to remove the ignominy of our tax-to-GDP ratio of around nine per cent. Further accentuating the problem is the fact that our black economy is perhaps larger than the reported one, and is probably growing at a faster rate than the GDP on the books.

The problem here is of intertwined political will and vested interests. The forces of the status quo have always been pretty strong, but they are perhaps at their most powerful at this stage of our political and social development. The privileged classes will never surrender their interests voluntarily for the greater ideal of a welfare state.

That is why you do not see any progress on the RGST – for the uninitiated, the ‘R’ in the acronym stand for ‘reformed’. Nawaz Sharif would have none of it, neither would Altaf Bhai or Maulana Fazal. The main constituency of these major political actors is industrialists and the trading classes. And to them, the RGST is analogous to ‘a can of worms’ because it would mean documentation (a fate worse than death it would appear), which would stop underreporting. The government has tried; the IMF is angry and its programme stalled, but this crew would not budge. Whatever their rhetoric, to these characters constituency is more important than the country.

The RGST remains stymied because of them and also because these folks find ‘support from’ the tax collecting machinery that stands to take a bigger chunk of the pie if everything remains undocumented and under its discretion.

The issue is that of moral authority also. When the prime minister doesn’t pay a single paisa in taxes and the larger-than-life opposition figure in Nawaz Sharif reports just Rs5,000 in his checking account, why should those down the slope be inspired to cough up.

Without a doubt, the much-clichéd term, broadening of the tax base and stopping underreporting, is the key to have resources that could put the country on the path of development, but there is none in sight even remotely capable of pulling this off.

As for austerity – which like justice must actually be seen to be practiced by our extravagant elite – it is not even talked about. The ever-increasing fuel bill of billions of dollars, for instance, can be cut down drastically by banning the gas-guzzlers employed in the service of the high and mighty at state expense (for the last few years, the security cavalcade has added to its impact). The BMW Seven Series by now should have gone to the auctioneer’s podium, but they never would in this country.

From the targets set for revenue yield, inflation rate and the public sector development programme, it is obvious that the government is not unaware of posting better numbers in these key areas. That said, only good intent is not enough to produce results. Having fallen well short of the previous, more modest targets, which were further trimmed as the last fiscal wound down, one is skeptical if the more ambitious benchmarks are achievable – more so because the tax collecting apparatus remains as incorrigible.

Falling short of targets thus being the most likely scenario, the next pre-budget period – the last of this dispensation in harness before the polls, unless economic or other factors blow it away – would probably be spent dishing out more promises and little pie to an angry electorate.

The writer is Sports and Magazines Editor, Pakistan Today.