Sunday October 24, 2021

Artificial inflation

September 24, 2021

LAHORE: Government cannot hide its incompetence by stating inflation is a global phenomenon.

Regionally our inflation is almost double than Bangladesh and India and many times higher than China.

It is true higher global commodity rates have triggered inflation the world over.

Global oil rates are the largest contributors of inflation in all the countries that import crude oil or petroleum products. This government claims the petroleum product rates in Pakistan are the lowest in the region but it did not help control inflation because prices are rising mainly due to the absence of government writ.

Pakistan is more of a governance-starved country than resource-short. Bad governance also hurts national unity as the so-called scarce resources are shared by few influential people.

Though Pakistan's economy is always passing through testing times there has never been consensus between the government planners, industry, the economists, and above all the general public on the way forward to ensure a sustained and equitable economic growth.

Improving governance is every government’s rhetoric, but the factors that improve governance or arrest wrongdoing are totally ignored. The first and the foremost condition for better governance is the complete elimination of discretionary powers of the rulers and the bureaucracy. The other is transparent accountability of businesses, bureaucracy and the policymakers that violate rules. These two conditions are totally ignored in Pakistan that results in chaos and bad governance.

Governance is not a rocket science. It is based on equal treatment of every citizen and no special favours or exemption to anyone. In fact the six basic principles of good governance include the process by which those in authority are selected and replaced, voice and accountability, political stability and absence of violence and terrorism. The position of Pakistan on these counts is not commendable. The capacity of the government to formulate and implement policies including government effectiveness and regulatory quality is essential for better governance.

The government of Pakistan has not been able to control prices, hoarding, smuggling and tax evasion it seems that the government lacks writ in implementing its own rules. The regulatory quality of its institutions is very poor. Lastly there is no respect of citizens and state for institutions that govern interactions among them that is rule of law and control of corruption.

The present government desires to increase the revenues by enlarging the tax base of the country yet it could not muster the courage to tax all incomes equally. In fact the only fully compliant taxpayers in the country are the salaried class because their tax is deducted from monthly salaries by the employers. The manufacturing sector conceals production to steal taxes.

The traders do not keep books and majority of them pay no taxes, while the few that somehow have fallen in the tax net pay nominal taxes that in most cases are less than the tax paid by salaried class having a very low living standard than the traders.

The importers cheat the exchequer through under-invoicing, diluting the import duty and other government levies by 100-300 percent.

The curb on imports is the stated policy of this regime along with facilitating the productive sector. However the government has allowed duty free import of electric vehicles that are very expensive and only the rich elite could afford it. They are not more than 5 percent of the total population. The unhindered import of electric vehicles and other luxury items has weakened our currency. The consequences of this devaluation are borne by the remaining 95 percent population including 40 percent absolute poor having no resources at all.

The agriculturists do not pay any tax at all. The majority of farmers live more comfortably than the high-salaried employees. The luxury cars plying on roads in the country are owned by the big farming families.

They accumulate wealth without paying any taxes and the sector has become a haven for parking black money. All the leading industrialists in the country now also own agricultural land that facilitates them in accumulating assets without payment of taxes.

The economists' advise the government to curtail non-development expenses while the government squeezes its development expenditure. The industrialists demand low energy and electricity costs while the government plans to increase it further. Pakistan failed to achieve sustained growth during the past two decades because it was a growth without governance that increased inequality and marginalised the poor. It is not lack of money but poor governance that is at the root of our poor performance.

Spending more money on schools where few teachers, if any, teach or on hospitals where doctors do not attend and have no medicines to give even when they want to, will not improve our social development. The government reacts to such criticism to make more drastic rules and regulations. They forget that ours is a soft state, that few of our rules are ever enforced.