THIS is with reference to the editorial ‘IMF negotiations’ (Dec 26). Even if the International Monetary Fund (IMF) negotiations succeed and the country returns to the IMF programme, the nation’s difficulties would not lessen except for a very short period of time.
Pakistan will continue to face the twin challenges of budget deficit and current account deficit. The problem, though, is not insurmountable if there is a will to implement crucial reforms.
To start with, revisiting the National Finance Commission (NFC) award can be considered. The transfer of resources to the provinces should be cut from the existing 60 per cent to 50pc in the first stage, and then to 40pc in the next. The provinces must generate more resources of their own.
Another critical step is to carry out sincere land reforms, and to bring the entire agriculture income, currently protected by exemptions, into the tax net.
Broadening the tax base is a no-brainer. We should target six million taxpayers, and bring retailers/traders and the whole services sector into the tax net as most of these are outside the net right now, or not paying their fair share of taxes. Inci-dentally, the Federal Board of Revenue (FBR) has access to all the data that can identify tax-evaders, but, for some strange reasons, it is not using the information the way it should. Besides, taxes on all non-essential items should be raised, including petrol used by fuel-guzzling private vehicles.
The running expenditure of the government needs to be brought down, including a freeze on salary increases for the next three years. Making pension contributory, and banning fresh appointments, except where absolutely necessary, are urgently required. Also on the list should be discontinuation of charity programmes, like the Benazir Income Support Programme (BISP), and the subsidised Utility Stores.
The State Bank of Pakistan (SBP) should drastically cut the interest rate while restricting grant of consumer loans by commercial banks, including car financing. This will channelise funds towards productive avenues.
Import of luxury/unnecessary consumer goods should be banned outright, or there should be a steep spike in duties to make their consumption prohibitive. Free Trade Agreements (FTAs) and Preferential Trade Agreements (PTAs) that are not promoting exports and are, instead, encouraging imports, should be thrown out of the window.
Exporters need to be given incentives, including cash subsidy of Rs10 per dollar of export remittance received and soft financing at 2pc interest for setting up new manufacturing units.
The limit for carrying dollars abroad during international travel should be reduced to $2,000, and private money exchange outlets should be made to shut down for at least 2-3 years. Demonetisation of Rs5,000 note can also be of help in this regard. And, finally, there should be strict check on smuggling, with cameras installed at each and every check-post to monitor the movement of all commercial vehicles with zero exception.
The reforms agenda may sound lengthy, but so is the case with the list of our problems. All that is needed is sincere leadership that may, for once, keep national interest above self-interest without being rhetorical about the nation’s fight for survival.
The way to set the ball rolling is a simple and sincere acknowledgment that civilian governments and military regimes have miserably failed the nation so far.
Published in Dawn, January 4th, 2023