July 24, 2006	Monday	Jumadi-ul-Sani 27, 1427

THE government faces the twin challenge of reducing poverty and at the same time reducing the high population growth rate. Though the macroeconomic situation has been improved and official poverty figures have come down from about 34 per cent in 2001 to about 24 per cent in 2005— a decline of 10 per cent in four years— the poverty rate is still very high.

This state of affairs is certainly unacceptable. Better performance is needed on this front. A sustained economic growth rate plus more state spending to alleviate poverty should obviously be the official goal. The problem is that the government is not able to collect enough taxes to be spent on meeting the poverty challenge.

The tax revenue has grown over the years. For the last financial year it was Rs700 billion. Economic growth and tax reforms have pushed up the collection by CBR – 81 per cent over the past half decade. But this is still not enough because notwithstanding the improved CBR collection over the last few years, the tax-GDP ratio at 10.4 per cent is much lower than the average 17 per cent for developing countries.

In other words, the government is not collecting enough taxes and is unable to meet its escalating expenditures. The budget deficit has touched 4.2 per cent of the GDP and government must create a more efficient taxation system to collects more taxes. Also, the rich must pay more taxes.

The issue of fair distribution of the tax burden among various segments of the economy is equally significant. All incomes regardless of source should be taxed. No exemptions be given for any segment as is the case now. For example, income from agriculture is not taxed adequately. The sheer wastage in state spending needs to be curtailed by improving the delivery system.

The amount of money spent on defence is very high and unsustainable. Last year it was Rs241 billion. If we add Rs35 billion of military pensions in the given figure, it goes up even higher. For that matter, even the amount for this year is higher.

Given the low level of development, more money needs to be spent in improving the quality of life of the people step by step by increasing health and educational facilities and by providing them gainful employment. Focus on an efficient and cost-effective physical and social infrastructure is also vital to sustain the growth momentum.

Although the “trickle down effect” may well occur, the state has to inject money directly to help the poorest of the poor. They cannot wait for other slow moving government programme to yield the desired outcomes.

The many official welfare schemes are simply not enough to make an immediate and significant dent in poverty. The responsibility of providing assistance to the poor is that of the state and it cannot be allowed to shrug off its responsibility that easily. Another glaring failure of the government is that it is not able to reduce the high population growth rate.

Pakistan’s population is 160 million. While the earlier growth rate was a high 3.1 per cent, it has come down and is now estimated about 2.3 per cent. The infant mortality rate was very high— 126.7 per thousand in 1984-1985—, has come down to 77 per thousand which is still a high figure. Measures are needed to control our population explosion.

Better job opportunities, proper education and health services plus population control measures have yet to deliver. In the two very significant areas of poverty reduction and population control, government has failed to deliver.