Adverse impact of Sixth Review warned

LAHORE: Noted economists have warned of an adverse impact of the 6th review of the IMF programme on the lower income groups and the poor as the burden of indirect taxes would further increase, which will push the Covid-19 pandemic- and inflation-hit class further downwards.

Economist Dr Hafeez Pasha moderated the session ‘Inequality in income and wealth in Pakistan’ at the Asma Jahangir Conference here on the concluding day. Dr Shahid Kardar and Dr Kaiser Bengali were panellists at the session, who stressed that the rich should share the burden of taxes to steer the nation out of the current crisis. Dr Pasha dedicated the session to women and children of Pakistan as they were facing the worst inequality in the country.

Dr Pasha opened the session by citing statistics from the UNDP Human Development Index Report 2020 that the wealth distribution in the country was more distorted than ever. The top one per cent elite of the country have access to more income than 20 per cent of population. Further, one per cent of feudal elites own 22 per cent of farm income, which was mainly derived from irrigated lands.

Kaiser Bengali said society is divided into two parts, and the rich and powerful were standing the wrong side of the fence while the poor and middle class was on the right side. “This has created two Pakistans, which is visible like one lives like Californian where four people live in a five-bedroom house, with an average of having two cars each house. This is a class whose children never sit in a public transport, while the tuition fee of their one child is three times the salary of the school watchman.

On the other side, eight people or more live in one-room house and they never imagine sleeping full legs stretched. Further, the Covid-19 pandemic adversely affected this segment as they even failed to pay their house rents during that period; they had to withdraw their children from school due to their failure to pay the fee.

Dr Pasha backed Dr Bengali viewpoint by citing the population census data. He said that over two million families are eight and more members living in one room. He stressed the need for focusing on construction of new housing units for the poor segment, which would help reduce poverty. However, powerful big builders lobby would never allow it, he added.

He said there had been no growth in real per capita income in Balochistan in the last 15 years despite 7th NFC Award due to non-existence of the infrastructure. So, the Balochistan government has done nothing except for providing some jobs there. He added that inequality was high and that it was more of a structural problem.

Dr Kardar said Pakistan had become very difficult country to govern, though the authorities had taken it very lightly. He said in their younger age, there was not much visible inequality as is seen today. People from both classes studied in same schools.

About the IMF programme, he said there was need to see external account and imports. He questioned the import of luxury cars, consumer goods, recreational travels alongside Hajj and Umrah, and foreign education. These all were costing heavily on the exchequer.

He believed that food insecurity and malnutrition would increase while the cost of consumer goods was already high. The IMF programme would further add burden to the consumer goods. The GST was already an exorbitant 17 per cent. Taxation system of Pakistan was not fruitful as 75 per cent of it consisted of indirect taxes.

Dr Kardar said Covid-19 pandemic adversely affected the inequality, and inflation proved more damaging to the poor class, while the government did not take economy seriously. Furthermore, 12 per cent lost their jobs due to Covid-19 pandemic. And those who were retained had to face salary cuts. However, the impact was not calculated in the income inequality.

Dr Kardar said the country needed a kind of surgery, but how would it take place is not known yet. Dr Pasha raised questions about growth in civilian and dictator regimes.

Dr Bengali said that Bhutto’s nationalisation saved the economy as the country was broken into two parts in 1971, but the economy did not collapse due to nationalisation. Had nationalisation not taken place, the investors could have taken away their money from the country, he believed.

He said the figures and data shared during the General Musharraf era were fraudulent and fudged, while Zia’s era was the result of the work carried out during the Bhutto era including Pakistan Steel Mills, which started production in the Zia era, and give a push to the economy.

About corruption, he quoted another economist Dr Asad Sayyed saying that in the military period, corruption accumulated into the hands of few generals, and in the civilian period, it spread among many. Concluding his point, Bengali said the issue of inequality lied in class divide, which existed in any institution too. Bengali said the politicians had to return something if they loot the national wealth as they were accessible to public, but others never do so.

Dr Kardar said that historically the system was rigged for the rich of society; therefore, any change in policy and law without making the poor class to be the stakeholders of the system would not bring about any change. The controller of the system would make the changes working for them.

Dr Bengali suggested rebellion to end the inequalities. There is no other option other than rebellion to end inequalities, he added.

Dr Pasha, widening up the session, said Pakistan took 22 IMF programmes in the last 43 years, which was the largest of any country in the world. That means Pakistan was in crisis every two years and come out of every crisis which showed it was a resilient nation. Further quoting the World Bank statistics, he said, “despite double of per capita income of India, Pakistan has lower incidence of poverty than India have. Pakistan has less inequality than India today. However, we need to do more, he added. With all odds, Pakistan has ability to move ahead and one day it will be in the list of the developed countries, he hoped.