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February 3, 2021

Fixing the economy

Newspost

 
February 3, 2021

The feeble economic recovery of the last few months, which was largely dependent on low oil prices and high remittances, is now under pressure. International oil prices have risen sharply. The government’s plan to return to the IMF programme may bring more pain – increases in tariffs, indirect taxes, interest rates and tight monetary policy. A number of measures can be considered to turnaround the economy. First, the government should work on reducing the import bill by compressing the import of luxury and unnecessary consumer items that consume $ 8-10 billion of foreign exchange. This step will provide enough space to do away with the IMF programme and avoid further debt trap. Second, it should demonetise the Rs5,000 note to curb corruption/money laundering and ensure the documentation of the economy. This strategy will enhance the tax base by identifying tax evaders and bring black money into the formal economy.

The government should drastically raise taxes on cigarettes and sugary drinks to discourage unnecessary consumption. These measures can put the economy on a sustainable path. The need is to look inward for self-reliance instead of depending on external crutches to prop up the economy and portray a false sense of stability as the previous governments did.

Shoaib A Majeed

Karachi