Half way through the fiscal, it is clear that revenue mobilisation is a more political than economic/financial process. The world bank is right in noting the government’s restricted fiscal space with concern, yet it misses the point by indulging endlessly in complexities of possible structural revisions in the tax machinery. There is ample productive capacity in the economy, and in leveraging it the government would only honour promises made at budget time. But Islamabad seems without necessary political will at present. Consider the following.
One, while targeted taxation optimises revenue generation and subsequent fiscal expansion, the FBR need not indulge in revising different heads till the simple matter of expanding the overall tax net is settled. The government has complete records of the biggest tax evaders. It just needs to take meaningful action against the top few to get resource mobilisation underway. And, despite promises, there is little progress. Two, Dr Sheikh promised blocking the Rs400 billion annual PSE leak. Yet the initiative has given way to political considerations, and the government is fine with settling with reforms instead, even at the sake of its political reputation. Three, weakening currency has not stimulated exports, which required a proactive shift in the official posture. There was little, if any, effort to stimulate manufacturing and industry, or incorporate value addition in the export mix. With last year’s commodity price hike in the international market fizzling out, the trade deficit is set to expand. Four, safeguarding the PSDP is mission critical in economic downturns. It provides essential fiscal expansion to help employment in addition to social subsidy for the most compromised. And as always, the development budget presents little hope when the government borrows heavily just to fund non-development expenditure.
It’s not that the economy is without a potential framework to ease Islamabad’s imminent insolvency. It’s just that the political will to get the economic engine rolling is just not to be found presently. Yet Islamabad ignores the economy, for political concerns, at its peril. The election is not very far, and a mobilising, disgruntled electorate is not happy with the financial sector.
