Former SBP chief pins onus of economic rot on elite
March 11, 2012
LAHORE: With a highly selfish elite unwilling to give up slightest of the privileges, the Pakistanis have been living beyond their means for too long a period, said Shahid Hafeez Kardar, former governor of State Bank of Pakistan.
“The root cause of the problem is the crisis of governance,” Kardar stated at a recent event at the London School of Economics, while discussing the political economy of the country.
He said the privileged class has been extremely successful in obtaining periodic bailouts due to Pakistan’s strategic importance in view of events in this region.
This has helped the elite to protect its interests while the economy of the country has remained in turmoil.
He regretted that Pakistan’s tax to GDP ratio of 8.6 is lower than that of Afghanistan and to further elaborate the point there are less taxpayers in 180 million population of Pakistan than number of taxpayers among 14.4 million population of Guatemala.
He said 63 percent of the parliamentarians do not pay any tax.
“There are 47,800 corporate entities and only less than 16,000 filed tax returns last year,” he said, adding that out of 3.1 million registered tax individuals only 1.2 million filed tax returns.
He said farmers do not pay any taxes but still demand subsidies on fertilisers, water and power.
Former Governor SBP said only one item of expenditure - the debt servicing - is equal to 120 percent of the federal government revenues.
He said domestic debt is ten times more expensive than the foreign debt. “We have 100 million young people with no skills and low education which makes it difficult for them to become stakeholders in growth process,” he said.
“The demographic advantage is turning into a demographic nightmare,” Kardar said.
He said there is a need to re-fix priorities from the security paradigm and change the mindset of the ruling elite.
He said regional trade should be given preference as the markets are growing in the East and it is not prudent to continue wasting energies on the dying markets of the west.
Kardar said reviving economy needs political will; there is little fiscal space for the planners, as the losses of public sector are very high.
He said country is losing Rs700,000 per minute on power losses, this amounts to Rs40 billion per month.
“Three months of power losses are equivalent to the entire amount promised under Kerry Lugar Bill,” he revealed.
He said three public sector companies the PIA, Railways and Steel Mills are incurring a cumulative loss of Rs200,000 per minute.
He said economic imbalances have acquired structural problem.
He said there is a misconception among some in Pakistan that it is too big a country that could be allowed to fail.
He said with the donor countries facing economic crisis at their front no one have the ability to help a population of 180 million.
He said foreign aid to Pakistan has been a curse that has postponed reforms. He said the donors should avoid capture of aid by interest groups.
Ending on a optimistic note Kardar praised the resilience of the people of Pakistan and appreciated the third generation entrepreneurs that resist corruption.
He said vibrant media has created awareness about governance and transparency. “Imran Khan Phenomena is because of this awareness,” he concluded.
“The root cause of the problem is the crisis of governance,” Kardar stated at a recent event at the London School of Economics, while discussing the political economy of the country.
He said the privileged class has been extremely successful in obtaining periodic bailouts due to Pakistan’s strategic importance in view of events in this region.
This has helped the elite to protect its interests while the economy of the country has remained in turmoil.
He regretted that Pakistan’s tax to GDP ratio of 8.6 is lower than that of Afghanistan and to further elaborate the point there are less taxpayers in 180 million population of Pakistan than number of taxpayers among 14.4 million population of Guatemala.
He said 63 percent of the parliamentarians do not pay any tax.
“There are 47,800 corporate entities and only less than 16,000 filed tax returns last year,” he said, adding that out of 3.1 million registered tax individuals only 1.2 million filed tax returns.
He said farmers do not pay any taxes but still demand subsidies on fertilisers, water and power.
Former Governor SBP said only one item of expenditure - the debt servicing - is equal to 120 percent of the federal government revenues.
He said domestic debt is ten times more expensive than the foreign debt. “We have 100 million young people with no skills and low education which makes it difficult for them to become stakeholders in growth process,” he said.
“The demographic advantage is turning into a demographic nightmare,” Kardar said.
He said there is a need to re-fix priorities from the security paradigm and change the mindset of the ruling elite.
He said regional trade should be given preference as the markets are growing in the East and it is not prudent to continue wasting energies on the dying markets of the west.
Kardar said reviving economy needs political will; there is little fiscal space for the planners, as the losses of public sector are very high.
He said country is losing Rs700,000 per minute on power losses, this amounts to Rs40 billion per month.
“Three months of power losses are equivalent to the entire amount promised under Kerry Lugar Bill,” he revealed.
He said three public sector companies the PIA, Railways and Steel Mills are incurring a cumulative loss of Rs200,000 per minute.
He said economic imbalances have acquired structural problem.
He said there is a misconception among some in Pakistan that it is too big a country that could be allowed to fail.
He said with the donor countries facing economic crisis at their front no one have the ability to help a population of 180 million.
He said foreign aid to Pakistan has been a curse that has postponed reforms. He said the donors should avoid capture of aid by interest groups.
Ending on a optimistic note Kardar praised the resilience of the people of Pakistan and appreciated the third generation entrepreneurs that resist corruption.
He said vibrant media has created awareness about governance and transparency. “Imran Khan Phenomena is because of this awareness,” he concluded.
