Economic miseries

LAHORE: Waiting for the IMF deal or assistance from friendly countries would not alleviate miseries of the people of Pakistan. We need to act on the domestic front by introducing pro-poor policies to compliment the efforts of outsiders.

It is time that instead of giving promises and hopes the rulers should start delivering on the economic front through prudent policies giving priority to dysfunctional regulatory institutions and bleeding public sector companies.

There is a minor issue that has since long been neglected that now costs the nation billions of dollars in wastage. For instance, the planners failed to ensure the availability of efficient heating appliances. Substandard burners, room heaters and geysers manufacturers were allowed to operate. The efficiency of these appliances was less than 20 percent and mostly still is. We are wasting 70-80 percent of natural gas through inefficient appliances.

The economy does need measures to ease the sufferings of masses more than that it needs immediate improvement in governance that could plug the corrupt practices. In government hospitals doctors and equipment would not be available for the general public but the VIPs are treated with the best equipment by the same doctors in the same government hospital. In the same way there is no dearth of qualified teachers in the government schools but the problem exists in their tendency to avoid imparting knowledge or completely stay away from schools and draw their monthly salaries.

The resources that MF desires the government of Pakistan to generate must come exclusively from the rich and not from indirect measures that mostly hurt the poor more than the rich. The increase in petroleum levy or increase in power rates to cover theft and inefficiencies or increasing the general sales tax rates are the measures that hurt the poor. Instead the government could jack up the corporate tax by five percent, tax income from stocks properly, tax real estate transactions properly. Increase taxes on all cars above 1000cc.

Last but not the least all the exemptions must be immediately withdrawn including the tax exemption on NGOs and other non-profit organisations. The government already gives reasonable tax exemptions to businesses on donations to NGOs or non-profit organizations. This exemption is not available in many developed economies. Similar such measures would generate more revenues than the indirect taxes that hurt the pockets of the poor.

The IMF simply wants the government to generate enough revenues to manage its expenditures. Currently we are taking revenue measures that hurt the poor richer and the poor. It is worth noting that 5-10 percent of the population has the capacity to absorb the current IMF dictated shocks and another 30 percent or even less may manage to survive by lowering their living standards and quality of life.

Overwhelming majority in medium low income like ours have nothing to fall back on. To survive each shock, they have to do away with some essential expenses. Since their first priority is to feed their families, they allocate most of their funds for food.

If the government takes prudent measures and gets rid of rent seeking bureaucracy through effective accountability the petrol prices would come down by Rs50 per liter and it would be a meaningful relief for the poor. If inefficiencies and common knowledge corruption in the power sector is controlled the power rates could be reduced by 10-15 percent and circular debt will start reducing as well.