When incompetence is in vogue

August 13, 2020

LAHORE: This government is being run on trial and error basis. Most ministers and bureaucrats have seen their ministries changed after few months. Despite this uncertainty, the government expects an...

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LAHORE: This government is being run on trial and error basis. Most ministers and bureaucrats have seen their ministries changed after few months. Despite this uncertainty, the government expects an economic turnaround.

When the economic managers and the chief executive of the country show exuberance on some positive vibes in the economy, they ignore the fact that the core problems in the economy have not been addressed but increased.

Our basic problem is the state’s inefficiency. The state-owned enterprises are bleeding the exchequer profusely.

Power sector inefficiencies could cave down the entire sector any time soon. The exporters refund issue has not been addressed.

Government has started releasing more refunds than the previous regime, but still, even the recent payables to the exporters are increasing and adding to the past refunds.

Rupee remains unstable. Even after pouring in billions of dollars through loans, the rupee continues to slowly lose its value.

There is no doubt that the government managed to increase workers’ remittances at a time when there is downward trend globally. Perhaps the strong anti-money laundering vigilance has routed many past informal remittances to the formal sector.

But the ground reality is that jobs are diminishing in many countries particularly in the Gulf where most of the overseas Pakistanis work. The recent strain in relationship with Saudi Arabia does not augur well for Pakistani workers in the kingdom. We are in the dark about the fate of our remittances in coming months.

Exports have shown robust growth in July but even if that growth is maintained we would hardly achieve this years’ export target. That would not be enough if we lose some remittances.

This government is not taking the exports seriously. Soon after assuming power its then finance minister promised five exporting sectors power and gas supplies at fixed rates of US cent 7.5 for power and $6.5 per mmfcd for gas.

He promised it would be for the entire term of this government. However, the allocations for this purpose were made on quarterly or six-monthly basis.

The procedure of subsidy was complicated as the power and gas distribution companies already operating in red could not pass on the agreed tariff to five exporting sectors without getting timely subsidy amount for the government.

Whenever the government delayed subsidy payment (which it often does) the distribution companies send the bills based on normal tariff to the exporters. The exporters had to go to the courts to get stay order every month.

The problem has not been resolved even today. Exporters are charged the agreed power tariff of 7.5 US cents but the sum add-ons relating to recent additional levies are added, increasing the bill by almost 30 percent.

Mills in Faisalabad have received inflated bills and many have approached the courts for stay orders. This uncertain policy has made it impossible for the exporters to take orders on the basis of agreed notified tariff.

They do not take the risk of reducing the export price which they can if the government notifies agreed tariff for long-term. The exporters are also facing problems in refunds.

The situation has improved but pending refunds are still piling up. This would not help the cause of exporters.

The most glaring failure of this government is that it has gone extremely soft on documentation. The traders were first let off by accepting their demand of fixed annual turnover tax instead of filing normal tax returns.

The government did try to trap the traders by making the CNIC condition compulsory of the buyer on any purchase of Rs50,000 or above in the budget 2018-19. It then continued postponing its implementation till the end of that fiscal.

Then in 2019-20, the condition of CNIC was enhanced to purchase of Rs100,000 instead of Rs50,000. Now the government has waived this condition on all retail sales.

It is interesting to point out that every time in the past two years the government has stepped back from its stance, while traders did not budge an inch from their stand to keep things undocumented.

There is no chance of substantial increase in fair tax revenues if documentation is not taken seriously. The government would be forced to continue with punitive indirect taxation that hurts the poor consumers only and not the retailer, importer or supplier.

Recent increase in construction activities is also because of waiver from asking the source of income. For how long are we going to try create jobs without documentation?

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