Another mini-budget by the PDM government has triggered a new price spiral which will further shrink the purchasing power of the common man. Naturally, there has been a howl of protest from all sections in society. The business community has rejected the mini-budget and warned that the imposition of taxes worth billions of rupees would unleash a “storm of inflation” to the misery of the poor people, besides slowing down the national economy.
Representatives of the business community belonging to chambers of commerce in all the four provinces have held meetings and sounded warnings that the new taxes would result in complete destruction of the economy. There is a consensus of opinion that the move would escalate the cost of industrial production and lead to a total collapse of the economy.
It has become quite difficult and instead impossible to run industries and businesses after a whopping increase in the prices of electricity, gas and petroleum products. Businesspeople have also complained about the unavailability of raw materials to industries due to the refusal of commercial banks to open letters of credit.
Parliamentarians have also condemned the government for its senseless decision to impose a new burden on the common man. In a special session of the Senate, members from both sides of the aisle took exception to some proposals of the recently tabled supplementary finance bill. Most members of the Senate Standing Committee on Finance and Revenue pleaded that the adverse effects of some measures on certain sectors should be mitigated. The members also criticized the government for imposing more taxes on the existing taxpayers. “Pakistan has become a paradise for non-taxpayers,” they lamented. Senator Saadia Abbasi of the PML-N rejected a provision of the finance bill that empowers the Federal Board of Revenue (FBR) to increase tax rates without seeking prior approval from parliament. In the meantime, the FBR has raised the GST rate from 17pc to 18pc through a notification, while this power was earlier not available to it. Another point being widely discussed in newspaper columns and TV talk shows is that those who claimed to put the economy on the right track and bring down the value of the American dollar have led the country to bankruptcy. It has been pointed out that on one hand, the government claimed to be taking austerity measures but, on the other, it has created a large cabinet and is indulging in unnecessary expenditures.
With Ramazan around the corner, a new round of inflation is going to hit tax-weary citizens who will have to further trim their household budgets to make ends meet. Even those who have been so far dodged the ravages of inflation will find it a challenge to stay afloat. On the other hand, the average 33pc inflation forecast for the first half of this year by Moody’s is bad news for the majority of Pakistani households already facing rapidly depleting savings.
Low-income households will be specially hit hard since much of the inflation is now being driven by non-discretionary items like food. Food prices are already high and further increases will push more people below the poverty line. As the State Bank continues to jack up interest rates, borrowing costs will skyrocket and create additional pressure on domestic demand. The most unfortunate part of these fiscal adjustments is that they may still not be enough to get the country out of the hole its financial managers have landed it in.
The blame is rightly being put on Finance Minister Ishaq Dar for his disastrous mismanagement of the economy in the past few months, as well as the State Bank for failing to take remedial measures in the period. But it is equally true that the roots of the problem go much deeper.
Over the years, the Pakistan economy has been destroyed by acts of omission and commission at the highest levels of power. The country has for years lived beyond its means. The real culprit is the section of the elite that lives a luxurious life spending extravagantly and preying on the country and its people’s future. As of today, while the vast majority is being forced to bear the burden of their unwise decisions, they continue to get free lunch, free petrol and free gas, besides numerous other perks and privileges at taxpayers’ expense.
It is said that many more mini-budgets are planned for the future. That will be the last straw on the camel’s back. More mini-budgets are not going to rescue the economy from its present predicament unless those in power dismantle the network of open and hidden subsidies and privileges that exists to benefit the country’s elite to the tune of billions of dollars every year. The present system stinks and is just not sustainable any more.