Wednesday November 29, 2023

A Herculean task ahead

April 09, 2022

LAHORE: Pakistan’s economic situation is worse than what the PTI government inherited when it assumed power on August 18, 2018. Foreign exchange reserves are vanishing, trade deficit is at its highest, inflation is double, and there is a run on rupee.

It would be an uphill task to manage the economy for the new setup. There is no room to provide relief to the common man. Priority should be given to restore the confidence of the bureaucracy and make it fully functional.

The PTI government sidelined most efficient bureaucrats and made frequent postings and transfers by giving the impression that persons transferred were not fit for the job.

This way the entire senior bureaucracy and their second tier were labelled incompetent, and they became dysfunctional. No government can deliver without a vibrant bureaucracy.

This was the reason the government could neither control prices nor take action against hoarders and profiteers. The new government must restore the writ of the state through bureaucracy. Both the PML-N and PPP have worked with the bureaucrats and know their competence.

Regulatory institutions have also been weakened and except for the State Bank of Pakistan, all decisions taken by the regulators were subject to veto of the ruling elite. These institutions must be strengthened and given more independence.

Pakistan Electronic Media Regulatory Authority should be allowed to regulate all media evenly and fairly. The recommendations of OGRA and NEPRA must be implemented. If the government wants lower prices, it should forgo its taxes and levies only.

There were some good steps taken by the PTI government and they should be continued. Its textile policy has paid dividends and it must not be tinkered with.

The five-year auto policy announced by the government must not be disturbed. Time has come when our political leadership starts believing in the continuation of economic policies.

This would give confidence to the investors, who would then make investments without fear.

The next budget is round the corner. This fiscal year ends on June 30. The government must fix realistic budgetary targets keeping in view the capacity and the capability of the resource generation and the present state of the economy.

Given the scarce resources, the budget size must be reduced by at least 20 percent through prudent savings and better administration. The number of ministries must be limited to 12-15. It will be a difficult task for the broad-based government.

Tax collection in the last year of the PTI government registered a hefty increase, but most of the taxes were generated from imports. Few new taxpayers were added.

Unless the tax machinery is reasonably reformed there is no way that the government could increase the tax base in the current depressed economic scenario. The service sector has been growing at a fast pace without corresponding increase in taxes.

The development of the services sector is beneficial to the economy only if it pays fair taxes.

The new regime must ensure that decline in revenue target does not impact the development budget.

All cuts must come from non-development budgets through a freeze on new cars, furniture, foreign tours or any up-gradation in offices.