Competency-based approach must for economic gains

January 20,2019

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LAHORE: The government remained unable to strengthen its grip on economy and it is, in fact, in more bad shape than six months ago. The foreign exchange reserves are at precariously low levels, while exports have not picked up.

The present government, like the previous ones, has inherited the systematic derailment of institutions, increased corruption and inefficient bureaucracy.

In the last almost six months, it has failed to make any improvement in these matters; in fact, the bureaucracy has become more lethargic than ever. The most disturbing aspect is that the bureaucracy has become more non-functional in the period under review, institutions are as inefficient as ever and there is no check on corrupt practices.

Contrary to the expectations, things are getting worse with each passing day. The prices are spiraling up due to rupee devaluation and bad governance.

The campaign to nab tax evaders has miserably failed. The foreign exchange reserves held by the State Bank of Pakistan dipped below $7 billion for the first time in five years. Load-shedding continues not because of power shortages, but due to bad planning and inability to import LNG on time, circular debt continues to rise, while revenues are declining.

Despite tall claims to add new filers in the tax net, the number of persons that filed tax returns declined by over 250,000.

Economists never expected miracles from this government, but they had a faint hope that the governance would markedly improve and merit would prevail in appointments. Sadly, the major appointments are still made on the whims and nothing has been done to improve governance.

The tendency of referring each case to the National Accountability Bureau (NAB) has not only exposed the incompetence of the anti-corruption watchdog, but also forced the bureaucracy to refrain from taking decisions , which has badly damage the creditability of the National Accountability Bureau.

People are now openly questioning the competence of this government. The government is expected to present second mini-budget in its short tenure. The finance minister says that there would be no new taxes in the mini-budget. He is right because instead of levying new taxes, the government would enhance the rate of some taxes. It is expected to levy one percent duty on all imports. This will net government around Rs70 billion.

If sales tax rate is also increased by one percent, it would net government another Rs80 billion. Both are indirect taxes that would hurt the poor more. The government would withdraw regulatory duty on import of raw materials that would cost it Rs5 billion only.

This government tried to collect funds for dams along with the former chief justice. The media houses ran a comprehensive campaign worth Rs13 billion (according to former CJ) and could hardly collect Rs9 billion, while Bhasha Dam alone would require Rs2,000 billion.

The donations are equivalent to only 0.45 percent of the dam cost. It has drastically reduced the development budget. The austerity announced by the government was only for public consumption. The non-development expenditure has increased substantially, despite austerity claims.

On the governance front, the government faced embarrassment. The award of Mohmand Dam contract to a firm owned by Razzaq Dawood has raised many eyebrows. The transfer of Pakpattan DPO was censored by the Supreme Court. The callous attitude of Swati has ashamed even many party stalwarts.

This government must be ruing the hasty rupee devaluation that is now under more pressure than two months back when foreign exchange reserves were a little higher.

Still, the government is managing the rupee stability through the same efforts that were the hallmark of Ishaq Dar.

Had they resisted devaluation earlier, the economy would have been in much better shape. The rupee devaluation has devastated the poor, as Pakistan’s economy is highly dependent on imports.

The government already lacked resources to provide relief to the poor. After the rupee devaluation the resource constraints have become sharper. The debt servicing has increased most of it without taking any loan.


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