Breaking the begging bowl

In order to put Pakistan on the growth path, Prime Minister Shehbaz Sharif has vowed to break the begging bowl by curtailing the government’s expenses. He said this while addressing the groundbreaking ceremony of eight development projects in the energy and communication sectors in Khyber Pakhtunkhwa’s Dera Ismail Khan district. A day earlier, COAS General Asim Munir also emphasised the need for economic self-reliance to end dependence on foreign loans.
There is a growing realization in the country that for too long Pakistan has depended on foreign loans and grants with devastating consequences for the economy, and it is time we got out of the debt syndrome. It is good that the present government has realized that the present policy of incurring loans after loans is not sustainable and we must change course.
But the million-dollar question is how to reach the goal of self-reliance. Many times in the past such fine words have been spoken but no action has been taken so far. Making the economy stand on its own feet to avoid going to the International Monetary Fund again and again for balance-of-payments support has been one of the most desired but elusive goals for most governments in the past.
For decades we, as a nation, have been living beyond our means – producing less and consuming more. The biggest culprit in this regard is the government which is wasteful and irresponsible in the use of national resources. Pakistan is a poor country but its minions live and work in a regal style. An example is the federal cabinet comprising over 90 members most of whom have no portfolio and are a burden on the national exchequer.
This year’s federal budget presented by his government made no attempt to curtail current expenditure, and instead envisaged raising it from the 2022-23 budgeted 8.7 trillion rupees to the revised 10.5 trillion rupees to 13.13 trillion rupees for the current year – a 52.9 percent rise from what was budgeted last year and a 26.5 percent rise from the revised estimates of last year. This means that the talk of breaking the begging bowl is a mere rhetorical flourish designed for public consumption.
According to economic experts, if the government is serious and sincere there are numerous ways to reduce current expenditure. The state-owned entities (SOEs) being run inefficiently require one trillion rupees per annum to operate – an amount that can be saved if they are privatized. The issue of getting rid of loss making state enterprises has been hanging fire for the past several decades but no remedial action has yet been taken.
Secondly, all subjects devolved after the 2010 passage of the eighteenth constitutional amendment are still being funded at the federal level in spite of the transfer of divisible pool taxes to provinces. This funding should be stopped forthwith. This step alone would reduce expenditure by close to three quarters of a trillion rupees per annum. It is also time to abolish the lavish perks and privileges allowed to higher bureaucracy which consume over a billion dollars per year.
The breaking of the begging bowl is not possible overnight. But a beginning should be made right away towards curtailing unnecessary and wasteful current expenditure. At the same time the government should implement tax reforms to widen the tax net instead of raising taxes on existing taxpayers.
Needless to say, it is through exports and FDI that most countries have achieved self-reliant economic growth and sustainable development. But we have neglected this aspect badly. The textile sector is the mainstay of the economy, contributing over 61% to total exports. In the opinion of most economists, exports are the only solution to the problem of loans and relief packages that we continue to seek from the IMF from year to year. Enhanced exports are the only tool to achieve real economic and political independence. Pakistan needs to prioritise value-addition to earn more foreign exchange from textile exports.
The textile sector needs cheap energy to become more competitive in the world market. Lower energy tariffs will enable the textile industry to reach full capacity production. This in turn will create new jobs, besides earning more dollars for the country. In the long term, to break the begging ball, we must create a strong export base and strengthen our external sector. Increasing exports make for higher financial inflows into the economy on a sustainable basis. Only in this way can we say goodbye to the IMF for good.