Past Govt, SBP ruined economy

Pakistan's prominent experts have suggested a multi-pronged strategy, starting with the widening of tax net and lowering public expenditures, to steer the country out of present economic morass and make it more welfare oriented for the poor. Renowned Economist Dr. Shahid Hassan, commenting on prevailing economic situation in the country, said that now the new government needs to take revolutionary decisions to improve the situation. The policies pursued by Pervez Musharraf government during the last eight years as also by the State Bank of Pakistan have destroyed the Pakistan's economy. When asked for suggestions to steer the country from present financial crisis, Dr. Hassan recommended a number of measures which the government needs to take. He said that a target of Rs 1500 billion should be fixed for the next fiscal year for tax revenues without burdening the common man. This, he said, could be done by doubling the number of income tax payers, by checking tax evasion and withdrawing undue concessions and suggested that the GST should be raised to maximum 5 per cent. Out of the total GST, 4 percent should be allocated in the education sector and three in the health sector. Corruption is eating into the society and destroying the moral fabrics besides destroying the national economy. There has never been greater need to eliminate or to minimize corruption more today than ever. Even just minimizing the corruption would be a positive contribution in the national economy. Dr. Shahid Hassan said that unproductive expenditure should be curtailed by 35 percent and the expenses of Prime Minister House, President House, Chief Ministers' House and Governor's House should be reduced by 80 percent. Talking about banking sector, he said the consumer financing schemes should be banned except for housing; banks should be given targets for microfinance for the poorest of the poor. The agriculture loan should be given for landless haris. Loans should also be given to farmers for the purchase of buffaloes, he underlined. He recommended that banks must be directed to offer a rate of profit which is above one percent of inflation rate to all saving account holders and the banking spread should not be more than 3 percent. "Foreign investment should not be accepted in banking and telecom sectors. The rate of interest on foreign currency deposits of one year and above duration of overseas Pakistanis should be significantly enhanced," Dr. Hassan stressed. This is a better option than non-quality worrisome investment. He further suggested that unnecessary and luxurious import should be discouraged and engineering sector and IT sector should be developed for boosting export. Agriculture sector should be given special attention while it should be ensure that better profit in stock exchange is not so much that industrialists divert their attention from industries to speculative transactions based on casino culture, he added. It is important that a new economic, financial including a new monetary policy is designed and corruption is checked without which success will not be achieved, Dr. Shahid Hassan concluded. We are already in deep economic crisis which has been making for the last many years but the previous government was painting rosy picture of our economy, said Rasool Bux Rais. The infrastructure was so weak and not been able to growth export. The previous government did not really invest in energy and agriculture sectors, while the other countries have been exploring alternative energy. To control the food inflation, we will have to pay attention of agriculture sector, the backbone of our economy, which will help open up vistas of jobs. He said the government will have to subsidies the agricultural inputs. The tax net should be enhanced broadened. Economist Farhan Zaidi said that the economic managers need to adopt both short and long term policies to bring the country out of present economic and financial crisis. According to latest statistics Pakistan has fifth highest inflation rate in the world after Venezuela, Russia, Egypt, and Sri Lanka. Constant rise in oil prices is not the only reason for our inflation but there are number of multiple factors behind it including poor governance and excessive spending on government establishments and ministers. The overall inflation in the current fiscal year is around 16.5 per cent compared to the widely cited range of 8-9 per cent by the government officials. Similarly, the food inflation rate reached 21 per cent during the period July-2007 to February-2008. A comprehensive set of actions is needed to control the deficits and inflation. A piecemeal and ad hoc approach will only exacerbate the economic woes and is likely to backfire in the next 12 months. The economic disease facing the country needs special attention and treatment, a tablet of aspirin cannot work when a strong doze of anti-biotic is needed to kill a fast spreading virus. Oil companies all over the world are almost arbitrarily implementing the oil pricing formula, which only benefits them virtually every stage in an unfair and non transparent manner. They violate the fundamental principles of market-based pricing and deregulation. When the prices are calculated and implemented, consumers did not know the mechanism of this intricate system which finally benefits the companies. One of the ways to reduce current account deficit and control anti inflationary trends is rationalization of import policy and review of national economic priorities. We must discourage non-essential imports and facilitate imports of raw materials and primary food items at lower tariffs. Last week's report of the Asian Development Bank (ADB) further strengthened the already widely held belief that the country is heading towards double-digit inflation. The report estimated inflation at 10.3 per cent in 2008, a sharp increase from 7.9 per cent last year. But many economists say the real inflation rate is more than 12 per cent. They say authorities should not wait until July, when the next yearly economic review is due, to take measures such as clamping down on the government's rampant domestic borrowing. They said the central State Bank of Pakistan (SBP) was printing too much cash to satisfy the government's appetite amid dwindling foreign exchange reserves, rising import costs due to high oil and food prices, and low tax collection internally. The need of the hour is that the government should start working on war footings about extending the crop maximization plans to balance food price inflation and improvement in storage and harvesting-thrashing to control wastage of food. Government needs to understand that easy and cheap food availability, access and deliverance to everyone at everyplace is the key to their survival.

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