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
Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation
| Date: | 14-Feb-2023 | Reference: | View Original Link |
|---|