Pakistan has repeatedly sought international support and is claimed to suffer from a chronically weak tax base. Every new government comes with the claim to break the begging bowl but eventually seeks the International Monetary Fund’s (IMF) help. Thus, the previous government, despite the promises of breaking the begging bowl, went to the IMF in 2019, albeit belatedly, to bail out the economy. The IMF in 2019 approved a $6 billion loan over three years for Pakistan but disbursement has been slowed by concerns about the pace of reforms.
Since 2019, six disbursements have been made and the seventh has been stalled due to the last government’s subsidy on petrol, along with other reasons. The PML-N coalition government had severely criticised the PTI government for first failing to control the fuel prices in the country and later for derailing the IMF programme through fuel subsidies. Now, the Finance Minister, after consultations with the IMF for the release of the seventh tranche of the 2019 approved loan, has reportedly agreed to curb fuel subsidies, which could bring a tsunami of inflation to the country.
As a consolation, the Minister has said that the government could reduce public sector development spending—which will negatively impact job creation in the country, with other necessary budgetary discipline arrangements for fiscal balancing. The government has assured that no extra burden would be put on the people, and the government will tighten its belt if necessary. However, how the government will pull this rabbit out of the hat remains to be seen.
The Finance Minister has also said that the country needed to move to a new economic model by removing obstacles and promoting exports to the world. The previous PTI government also made a similar claim of improving exports. And before that, PML-N and PPP governments made similar claims in their tenures. Thus, this mantra of magically improving exports to the tune of billions of dollars to kick-start the economy is now a cliché.
However, no government tackles the elephant(s) in the room. The most notable one is related to highly inefficient public sector enterprises such as PIA, Railways, and Pakistan Steel Mills which are running in billions of rupees in loss on monthly basis. Every incumbent government has to cover these losses plus arrange bailout packages of billions of rupees to keep these government enterprises afloat. The present government is crying hoarse over the petrol subsidy given to the general public for the last few months, but does not talk about the billions of public money lost on daily basis and the possible means to address this haemorrhage.
Similarly, all Independent Power Producers (IPPs) are milking the country in the shape of circular debt, which is an abyss into which billions and billions of public rupees have been poured, but to no avail. Credit is due to the PTI government for re-negotiating with these IPPs to reduce the circular debt. Now that a coalition government of PPP and PML-N is in place, and in their previous tenures these IPPs’ accords were inked. Therefore, it is incumbent upon the present coalition government to further deal with IPPs and correct the wrong done to the country through lopsided agreements with these IPPs.
Further, the inefficiencies in the transmission system such as power theft are recovered from the honest bill-paying customers. Similarly, inefficiencies in the gas transmission systems are also recovered from the honest public. Thus, all governments, instead of tackling real problems and addressing structural and operational inefficiencies head-on, resort to getting money from the already fleeced, honest public through direct and indirect taxes.
The new Finance Minister has said that we have such an elite-benefitting country that almost every subsidy that you can speak of actually goes to the richest people, which is very true. But to add to this, the richest and most powerful people in our country also do not pay taxes, live on public money such as free accommodation and utilities, travel on expensive chauffeur driven cars, free junkets, and lucrative contracts, and then have the impudence to lecture the ordinary public on belt-tightening and making sacrifices for the country.