Creating internal resource essential to get out of doldrums
According to Ishaq Dar, the present hike in inflation has resulted from the previous government’s failure to impose fresh taxes worth Rs200 billion, by not increasing electricity tariffs by Rs6 per unit and lack of ability to achieve the revenue target. Few had heeded to the PPP government when it held Pervez Musharraf responsible for power shortages by not adding much to the national grid. Explanations of the sort do not wash as what matters to the common is the situation he faces and currently it looks pretty worrisome to him. If instead of passing on the blame for economic woes to their predecessors the finance minister was to concentrate on his task, the chances of taking the economy out of doldrums would increase.
Launching of $500 million worth of Eurobond and $500m remittances-based rupee bond, followed by fast-track capital market-based disinvestment of government shares may all be good ideas. So is the auction for spectrum telecom to generate $1.2-1.5bn. They would however add to the finances only once. The health of the economy will in the ultimate analysis depend on how much finances the country is able to generate from internal resources. It is here that a breakthrough is required but is nowhere in sight. For this the economy needs a sustained effort at fundamental, structural reforms requiring sacrifices. The common man can adjust to a more austere living if he finds that the government is tightening its belt and those in the upper income bracket are also willing to make sacrifices. In case the government is seen to be putting on fat and the super rich are found to be continuing an exhibitionist style of living and successfully resisting any change to it, there is little hope of the idea of austerity getting traction. Extraordinary efforts are needed to raise the tax to GDP ratio, which came down from 9.1 pc in 2011-12 to 8.1 pc in 2012-13. Meanwhile power sector’s circular debt has piled up once more despite Dar’s promise to never allow it rise again.
There is a need for the government to speak with one voice on vital issues. The finance minister sounded pessimistic if not cynical about the future of the Pak-Iran pipeline. The petroleum minister on the other hand has consistently taken the stand that it is both necessary and feasible, Two days before Dar’s statement the foreign office said Pakistan will push forward with the pipeline to import natural gas from Iran. It creates the unhappy perception as if one hand in the government does not know what the other is doing.
