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Black economy

September 14, 2017

THE formal sector of the economy is shrinking rapidly whereas the black economy is increasing manifold. People have started keeping their money at home or in lockers rather than in their bank accounts.

There are two reasons for this: First, excessive taxation on sectors of the economy that are, already overtaxed, and, second, coercive measures by the Federal Bureau of Revenue to generate revenue. The people are reluctant to pay tax because they are not satisfied it the manner in which the public’s tax money is spent or rather misspent.

The solution is reasonable salaries and simpler lifestyles of politicians and of all government functionaries. The reckless spending of public money on elitist motorways and an expensive transport infrastructure is not a wise policy.

The country’s foreign exchange reserves have come under perennial pressure owing to our profligate ways.

In my opinion higher interest rates would help to attract higher investments in local currency and make the rupee stronger. At the prevailing interest rates, local capital has no alternative except for fleeing abroad.

P.S. Ahmed

Islamabad

Published in Dawn, September 14th, 2017