Déjà vu

LAHORE: Shaukat Tarin as finance adviser in the last Pakistan People's Party (PPP) regime had stated at a pre-budget seminar on May 29, 2009 no new taxes would be imposed on the industry in the next budget and agricultural sector would be facilitated. Does it ring a bell?

Now as Federal Finance Minister, he made the same statement addressing a seminar a week back. He also deplored low tax to GDP ratio like he had in 2009. Pakistan’s economy is moving in circles. In fact we are now worse off than 11 years back. There is scarcity of financial managers in the country. The Pakistan Muslim League-Nawaz (PML-N) depends on the expertise of Ishaq Dar only.

The PPP and Pakistan Tehreek-e-Insaf (PTI) have to bring in financial experts from outside. Both tested Hafeez Shiekh and Shaukat Tarin as their tax managers. These two gentlemen acted in accordance with the policies of these parties.

Both expressed dismay at the state of the economy before they joined the government. Tarin was particularly critical of the way Shiekh handled the negotiations with the International Monetary Fund (IMF).

He was not hopeful of any turnaround with the policies introduced by his predecessor. Then the government suddenly announced the economy is on the move and had posted 3.94 percent growth. Tarin seconded this assertion and conceded the policies of his predecessor played a role in the turnaround.

This is all confusing because the current finance minister did not grasp the economic situation earlier properly. He accepted the coveted post hastily. The economic situation is not as rosy as is being depicted by the state run machinery.

There is confusion all over. This government claims it has returned $19 billion in loans in the last two years. It is statistically true but if the loans were returned from the government resources the total foreign loans should have declined but they have increased by over $19 billion.

If the loans were taken to return the past loans taken by the previous government the total foreign loans should have remained at the same level as the previous regime.

The most depressing aspect of newly added foreign loans is that the government has used most of these loans on consumption and not on real development. The money thus circulated did create limited economic activity. The finance minister has admitted that the growth has come from the large scale manufacturing sector that employs a very small percentage of the workforce. It has not been witnessed at the SME level that creates most of the jobs.

The government is acutely starved of resources. We are meeting our resource needs through domestic and foreign loans. The government seems to be afraid of taking revenue generation steps. Even the sharp increase in price of crude oil has not been passed on to the consumers.

The state functionaries proudly boast that petroleum rates in Pakistan are the lowest. They have sacrificed petroleum levy for political appeasement. No government is perfect as miscalculations are bound to occur when formulating policies. But all the adverse factors in the economy cannot be blamed on past rulers only. There were some flaws in the handling of the economy by this regime that made people of Pakistan suffer badly.

Take for instance the wheat fiasco. It was triggered by the faulty decision of this regime to allow wheat exports when it did not have sufficient stocks to last till the arrival of the next crop last year.

The price havoc created by that shortage was exploited by hoarders that siphoned off the new harvest in secret warehouses and kept the prices high. Now 14 months later the consumers are buying wheat at a rate double than 2018. How was the past government involved in this fiasco?

Sugar crisis erupted because the government allowed its exports. The export subsidy was not the problem. Previous regimes allowed similar exports and subsidies but the exports were allowed under a plan. The government kept an eye on domestic sugar prices.

The moment the sugar rates increased even nominally the export was suspended. This government continued allowing export of sugar while the domestic rates started climbing up from the day the first export order was executed. Had a timely decision been taken there would have been no sugar scandal. How can the present regime pin the high sugar prices on their predecessors?

It is unfortunate we are passing through testing times. This government has done a commendable job in diverting illegal foreign transfers through legal channels. But it has taken a dangerous step by offering a 7 percent mark-up on Roshan Digital Accounts. These accounts would in a year start diverting remittances through these accounts.