Govt should revisit subsidies for PSEs: IPR

LAHORE: The Institute of Policy Research (IPR) in its budget proposals has suggested the government to make tough decisions that affect the political economy of tax avoidance and evasion. To make spending more effective, it suggested the government should revisit subsidies for public sector enterprises (PSEs).

In its detailed report, the institute pointed out that the government forecasts a lower than justified target for the fiscal deficit. It usually gives higher revenue and lower expense amounts than circumstances merit.  The government also uses high provincial surplus estimates to bridge the gap, it said, adding that to earn more revenue,

It must also think through development priorities and debt management. These are top level decisions. The government has done well at fiscal consolidation recently, it added. The economy faces enduring challenges. These include the twin fiscal and current account deficits, insufficient funds for services and investment, and ineffective public spending.

There are indications that energy prices may increase again, it said, adding that means further pressure on the balance of payments and inflation. Manufacturing growth is well below the target and agriculture has only modestly recovered from the last year’s radical decline. Exports are stagnant.

The report calls on the government to strengthen the macro framework. This is possible by increasing government revenue through broadening the tax base, reducing exemptions, and strengthening compliance. The government must rationalise expenditure and to the extent possible increase the share of development spending.

It must reduce subsidies by reforming or privatising PSEs. There is an urgent need also to review the power sector policy structure. The present power policy will take us back to a dead end after initial improvement, it said.

The report also proposed the government to link unemployed youth with an existing social security system, for eg, BISP. It must promote export of workforce by providing skills training with the international certification, it suggested.