NationalVolume 14 Issue # 17

Towards a charter of economy

In a welcome development, the PTI government is planning to develop a charter of economy in consultation with political parties and other stakeholders for the purpose of sustainable growth in the country.

 

Speaking to the media, Federal Finance Minister Asad Umar has disclosed that the government had drafted a medium-term economic framework which would be soon made public. He added that even if a consensus could not be developed on the framework, still the government might get productive feedback and suggestions from various quarters. He emphasized that economic decisions should be based on sound economic theory, more importantly on empirical research and not on self-interests.

The government of the day and the opposition, as a matter of fact, are like two wheels of a vehicle. Both wheels must move together in a smooth manner, otherwise the speed of the vehicle will be adversely affected  and it may not be able to keep moving straight on the road onward for progress and development of the country and the welfare of the people. If one wheel gets defective in any manner and the system does not work smoothly, then the people at large suffer more than the government as the speedy and timely implementation of the on-going development projects in different sectors all over the country suffer.

In such a situation, quite obviously, the developmental activities are hampered, both directly and indirectly, and fruits of the development projects do not reach the people as intended by the government. Furthermore, in a parliamentary system, the opposition leader in the National Assembly is regarded as the prime minister-in-waiting. In Britain, the opposition also has a shadow cabinet, but somehow the tradition of having a shadow cabinet by the opposition does not exist here and no attempt has even been made to promote the idea. In a democratic system, the opposition also has the right to criticize government policies, programmes and developmental activities. Such criticism is good and welcomed by the government, if it is healthy and aimed  at improving  things. Mere criticism for the sake of criticism is neither liked by the government nor it is productive in any manner.

Given this context, it is a good initiative by the PTI government to take opposition parties into confidence on the issue of economic revival. The main problem facing the national economy is concentration of wealth in a few hands and rising inequality in society. This is what is called elite capture of national resources. A World Bank report has identified influential groups, like large landowners, parliamentarians, civil servants, multinational corporations, industrialists and security services who hold Pakistan’s economy in their grip.

This has been going on for decades now. The single biggest privilege enjoyed by the elite is tax concessions estimated at Rs400 billion only on account of income tax exemptions. In recent years, allocation of land for residential and commercial development in large cities has become a primary source of large capital gains and increasing wealth for the privileged classes. The rich people, especially the landed aristocracy, pays little or no taxes at all, while living a luxurious life including palatial houses and foreign travel.  The feudal class pays low income tax and very low water charges and enjoys huge subsidies. One per cent of landlords still hold 22% of land and 50% of total farmers own only 11% of land.

This state of inequity and injustice should be brought to an end now. A major step towards it would be to withdraw all needless and overgenerous tax exemptions for the rich which are costing the country Rs850 billion annually. The subsidies for the agriculture sector should be more finely targeted, so that only the poor benefit from them. Experts also suggest withdrawing most of the 41 types of withholding taxes as these are not contributing to the income tax collection. Recently, the federal finance minister announced a drastic reduction in the number of withholding taxes from the next budget, including the tax on banking transactions being collected from non-filers of tax returns.

The severe challenges facing the economy require that the government and opposition develop a common charter of economic reforms in the larger interest. The government’s decision to cut development spending, increase the interest rate and prices of utilities and currency depreciation have increased the prospects of stagflation. Rising inflation and unchecked population growth pose a serious threat to all our economic plans and projects. Revenue is not increasing at the desired rate, while exports have stagnated. The burden of foreign debt has become cumbersome. All this requires that we close our ranks and develop an agreed plan of action to deal with the situation. At this juncture, political confrontation is highly damaging for the economy. Given the urgency of the situation, the government should not lose any more time in calling a joint meeting with the leaders of all major political parties in the country to develop a new roadmap for the revival of the economy.

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