Economic collapse from political failure

LAHORE: Global experience tells us that growth is spurred by good governance, good economic policies, good institutions, good macroeconomic management and good luck. Unfortunately, all these parameters are absent in Pakistan.

Pakistan is passing through its gravest economic crisis since its independence. There is a generalised breakdown of economic order and social order as well. Economy is in a deep recession that is accompanied by high inflation, high unemployment and sharp increase in poverty. These factors are naturally worsening the law and order situation.

However, this did not happen overnight. Economic experts have since long been warning the ruling elite of the disaster we were heading towards.

They pleaded the government to stop the country from going totally bankrupt, to improve governance, strengthen institutions, reduce expenses and increase revenue through fair taxation.

Pakistan never experienced such high inflation as the country has been experiencing for the last two years. It has sharply eroded the value of our currency. There is no let-up in the intensity of inflation despite the best efforts of the government.

It has never happened before. Our society in general has not been able to bear the consequences of high inflation. Food, even staple food like wheat has gone out of reach of the poor. The quality of life of the poor has deteriorated to inhuman levels.

The nation is paying a heavy price for the follies of all past governments that dedicatedly supported exclusive growth and denied level playing field to all by dolling out favours and concessions through SROs.

Sadly, our government’s expenditures are double than its revenue. There is no way out but to reduce the government expenditure and raise revenues by taking measures advised by the global institutions.

Instead of increasing taxes, the government should explore new avenues of revenue collection like property tax, capital gain tax and agriculture income tax. Inclusive growth would come through strong institutions. The nature of growth during the past 76 years has been exclusively benefiting 2 percent of the population.

This is the reason that poverty is not going down in Pakistan even during very high growth periods. It is time that the economic planners start formulating viable policies for small farmers, SMEs and cottage industries to ensure equitable growth. Economic bankruptcy is the consequence of political bankruptcy in Pakistan.

Economic meltdown is peaking, while social meltdown has already peaked due to rising disparities, injustices and high unemployment. Political leadership regrettably have major assets abroad. Many legislatures who pass finance bills do not pay taxes.

There should be no representation in public office without tax compliance. Tax evading culture flourishes in Pakistan because the defaulters do not go to jails which is a norm in developed economies.

Bureaucrats operate without proper and transparent accountability. Breaking rules and laws must be a punishable offence. Moral legitimacy of the tax collectors declines if the ruling elite and legislatures who impose taxes, do not pay those taxes themselves.

Moreover, there should be no income tax exemptions for any individuals, be it the president, prime minister or a judge. All incomes must be taxed equally. Even pensions should be taxed if they fall in the taxable bracket.