Imminent default avoided, what’s next? nothing

Negotiations with the IMF have concluded and, hopefully, next tranche would be released soon

Mini-budget is anticipated with further squeeze of ordinary citizens through indirect taxes, particularly in the energy sector that may yield a couple of hundred billion rupees

Imminent default could be avoided

This is the likely scenario for next couple of months, but then what? Nothing

With a constant budget deficit forecast to stay over 5% in the coming years, consistent inflation of around 20%, if we go by official numbers, dwindling exchange rate and $21 billion repayment of foreign debt still due, where are we heading to? Can this mini-budget and IMF tranche solve the problems? Absolutely not

Have we developed any medium to long-term plan for mitigation and response to this economic crisis? Absolutely not

Are we raising voices on the absence of such a plan? Even if we are, are these being noticed by the quarters concerned? Absolutely not

However, I would keep on, like a few other concerned citizens, at least to fill the Monday pages of newspapers as there is not much economic activity happening otherwise to be written

It would be very easy for the finance minister to say, what are the alternatives? There are many, sir

Please let the nation know what happened with super tax and how much the national exchequer would have gained, had we implemented it in true letter and spirit? More than this mini-budget, sir

However, it is easy to squeeze an ordinary citizen than the powerful corporates

Please let the nation know how much can we squeeze from the non-development public expenditure at this point in time and how much do we spend on perks and privileges of the powerful ones

More than this mini-budget, sir

However, it is surely easy to squeeze the general public

And there are many such black holes which are evidently eating national resources but no one touches them

Let me present a suggestion for bridging the current fiscal gap, despite knowing that it wouldn’t be even noticed

Rather than luring overseas Pakistanis with returns on investments that are unsustainable in the long term, why don’t we reach out to the corporate sector and issue “Pakistan Stabilisation Fund”, whereby big companies, particularly the banking and telecom sectors which have really minted unprecedented profits in recent years, invest in this fund for reasonable returns on investment and a long-term tax credit to be used over the next 10 years

Even if the largest 10,000 companies of Pakistan invest in this fund, the resulting amount would be far higher than the one through the forthcoming mini-budget

There are at least 10,000 companies with such investable funds

The Pakistan Stabilisation Fund may also have a consumer component, if the citizens of Pakistan invest through major foreign currencies

It is more like extending the Roshan Digital Account to citizens as well, and this idea has already been in the discussions

The other track of investments by citizens may also be in Pak rupees, offering higher returns, to meet the immediate fiscal gap

This may help in avoiding the squeeze through the mini-budget

Another logical contributor towards the Pakistan Stabilisation Fund would be the large housing societies, which are sitting on stashes of cash

It may not be incorrect to say that the amount of extra cash with a major developer of housing projects is much larger than the anticipated revenue through the mini-budget

Can we not borrow this cash to meet the short-term fiscal gap? There are many other options, only if one is serious to look into these

For example, rather than privatising national assets such as PIA and steel mills, please calculate how much we can raise if government officers’ houses in Islamabad are privatised

There are hundreds of these in only posh sectors of Islamabad

An auction of even half of these would result in more revenue than the mini-budget

The problem is still the same; it is easy to squeeze the ordinary citizens than bureaucrats

There is always a limit to everything, including the easy solution to raise revenue through squeezing the general public

The limit is almost over

It may be easier to manage debt default from the economic perspective than the social and civil backlash against the squeeze through indirect taxes, particularly on utilities

So, what’s next? Nothing in terms of economic planning but a lot in terms of societal backlash

Brace for the impact in both cases

The writer is an international economist   Published in The Express Tribune, February 13th, 2023

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Date:14-Feb-2023 Reference:View Original Link