‘Black economy’

In Pakistan’s case, ‘black economy’ is the wrong term – gives an impression as if it is about drug cartels or money originating from organized crime syndicates. In Pakistan’s case, it should be ‘informal economy’. And Pakistan’s informal economy is Pakistan’s economic backbone.

Here’s why: One, Pakistan’s informal economy employs at least 73 percent of our labour force. Two, Pakistan’s formal sector is heavily dependent on goods and services produced by the informal sector.

Our government, for the record, is a hugely deficit government. The government’s so-called Public Sector Enterprises (PSEs) manage to lose Rs1,100 billion a year every year. The circular debt has hit a high of Rs1,600 billion. The leakages in the gas sector are somewhere around $2 billion a year every year. The leakages in public procurements run into trillions of rupees.

In all probability, even if the taxpayers pay Rs10 trillion a year our government would still somehow manage a budget deficit. It is not about the ‘black economy’. It is not about raising taxes. It is all about government losses.

Here’s where the PTI’s economic policy went wrong: the PTI killed transactions. Dr Nadeem ul Haque, one of the best economic thinkers in the country, says, “Kill transactions, kill economic growth. Shopping malls are empty, consumer businesses are reporting losses in double digits, people are losing jobs while new ones are not available, and new investment is not happening. This is not a downturn in the economy. It is merely the culmination of amateur hour in policymaking that donors and bureaucracy have combined to develop for decades. The thirst for taxation has driven the economy to the ground. Economic activity is now gasping for air.” The PTI killed transactions-and killed economic growth.

Dr Hafeez Shaikh will have to stop the genocidal campaign against Pakistan’s informal sector. Our new advisor to the PM will have to bring back the lost confidence. And then sign up for the IMF programme ASAP. These steps must then be followed up by reforming and restructuring public procurements, the electricity sector and the gas sector.

The IMF is bent upon jacking up the electricity and the gas tariff. Dr Hafeez Shaikh must prepare a plan to lower the burden on low income families. The IMF is bent upon jacking up the tax burden by Rs600 billion. Dr Hafeez Shaikh must prepare a plan to lower the burden of indirect taxation on low-income families.

Every country on the face of the planet has an informal sector (according to the International Labor Organization, the informal sector in the US employs up to 40 percent of the labour force.). To be certain, our informal sector is the backbone of our economy. According to most estimates, our informal sector is more than half of our GNP (gross national product).

To be sure, around 45 million Pakistani workers – and their families – depend on the informal sector for their livelihoods. Don’t kill the livelihoods of 45 million Pakistani workers – and their families. Don’t kill the informal sector. Please don’t.

The writer is a columnist based in Islamabad.

Email: farrukh15@hotmail.com Twitter: @saleemfarrukh