Tuesday June 18, 2024

Economic strain

By Mansoor Ahmad
May 24, 2024
People buy pulses and grains at a wholesale market. — AFP/File
People buy pulses and grains at a wholesale market. — AFP/File

LAHORE: The country is being run as a rudderless ship that is unable to reach its destination because of the destruction of its steering mechanism. The ruling elite is divided, the IMF is stubborn, and the investors are paying lip service to mega projects.

The Prime Minister Shehbaz Sharif is visiting friendly countries to garner financial support. The coalition partners are openly questioning his policies. The main opposition party is not prepared to talk, even on national policies.

The foreign minister has not come out of his hangover on finance. The policy that the new finance minister spells out is not acceptable, even to the main ruling party. No one is prepared to part with privileges (however small they may be).

The nation needs to save every penny to pay off its huge debt. The next budget remains a mystery. An elitist class is in power that does not want their wealth or influence diluted through fair taxation.

The IMF, realizing the situation, is asking for further jacking up petroleum rates and increasing power/gas tariffs. Pakistanis are already paying Rs60 per liter as a petroleum levy, and a further increase in its price through new taxation is unjustified.

The government is reluctant to slap a sales tax on petroleum products, most probably because 56 percent of the collected tax would go to the provinces. Instead, it wants to increase prices through a new tax, all of which would be retained by the federal government.

The IMF is not fair while asking the government for measures that only increase revenues and impact the poor. Why does it not put its foot down on eliminating corruption from the power and gas sector? The rate of power in Pakistan is the highest in the region, and the power sector regulators lament that it is because of the capacity charges that the state has to pay to the private sector power producers, as power generation capacity in the country is higher than consumption. Though the handling of the power network is debatable, the increase in tariffs made in the last three years is more than enough to cover the capacity charges.

The higher power and gas tariffs are a boon for the corrupt because the line losses continue to remain high, and the gas theft percentage has increased. Actions against power and gas theft have been muted because the raiding parties are the same that abet thefts.

We are increasing the salaries and perks of government servants on the pretext that inflation has eroded their purchasing power. This is true, but in view of revenue shortage, only government servants up to grade 14 should be compensated.

Moreover, has the purchasing power of only government servants eroded? Pension reforms are the need of the hour, but the bureaucracy is reluctant in this regard. This government formed many committees to probe irregularities in government affairs, but the outcome is still zero. Many FBR officers were removed for failing to implement a track and trace system.

Is this system operating now? Traders have refused to register under the Tajir Dost scheme. They were threatened with severe consequences for non-compliance. Has any action been taken in this regard? It seems that there is no one who steers this rudderless ship.