The Pakistan Economy Watch (PEW) on Monday attributed the continuous load shedding across the country to the differences between the caretaker federal ministers and affirmed the need for tax reforms in the country.
The Ministry of Water and Power (WAPDA) needed Rs 22 billion to alleviate the crisis but the Finance Ministry was not ready to pay the money as it would annoy the International Monetary Fund (IMF) by increasing the deficit, , despite the prime minister’s directives.
Load shedding has compromised economic growth and added to the masses’ frustration to the extent of turning them against the country, said PEW President Dr Murtaza Mughal, adding that Rs 180 billion was allocated as power sector subsidy in the last budget which was revised to Rs 291 billion. It has now crossed Rs 315 billion, but the situation has not improved. He maintained that Pakistan’s power sector cannot be saved unless the tax-to-GDP ratio was increased, which has instead fallen by almost one per cent a decade.
Dr Murtaza Mughal said that reforming the tax system would provide funds to revive the power sector; otherwise it would continue to compromise the economy. He pointed out that three million shopkeepers were contributing 1.5 per cent to the sales and income tax while agriculture which was 22 percent of the GDP has been contributing less than one per cent.
Currently, the central and provincial government’s tax administration was working at around 20 percent efficiency which forced policymakers to revise tax collection targets every few months.
Dr Murtaza Mughal said that if new government initiated reforms and reduced gap between income and expenditure which currently stood that at Rs 800 billion, it would gain investors’ and lenders’ confidence. Otherwise, domestic debt would cross Rs 10 trillion by the next fiscal year, he warned.
Mughal maintained that the government should also initiate a massive investments plan in the power sector and infrastructural improvements to revive the economy and create jobs as the private sector had lost interest in investment.