The current economic and political mess is triggered by a murky set of rights enjoyed by the authorities embellished by major lapses owing to the corresponding blurred responsibilities.
And the fundamental rights of common citizens, which are needed to allow them to improve their quality of social life and livelihood, are stifled, which creates social exclusion.
In the last 75 years of independent existence, we have failed to resolve the issue of sharing rights and responsibilities equitably among the three tiers of government: federal, provincial and local. Political polarisation has undermined national unity based on common values required to make steady economic progress and shared prosperity.
The dismal conditions have activated over 100 civil society organisations to form a group — the Mediators — to organise a multi-party meeting to de-escalate mounting political tensions and find amicable solutions to the economic, political and judicial crisis. They have succeeded in enlisting the support of six coalition government partners. Persistent efforts are required to succeed.
In the last 75 years of independent existence, we have failed to resolve the issue of sharing rights equitably among the three tiers of government — federal, provincial and local
Their struggle should continue to realise a new social contract within the broad framework of the 1973 Constitution embedded with a long-term vision.
After a thorough study of the causes and effects of the first worldwide stagflation in the early 1970s, certain social scientists concluded that rights and responsibilities needed to be widely dispersed to avoid such crises in future. The then-emerging strategy for a people-centred economic development was set aside to pursue financial globalisation to combat stagflation which is now back with a vengeance.
In Pakistan, the consumer inflation rate has hit an all-time high of 35.4 per cent. The State Bank expects the inflation rate to remain high in the near term. The latest World Bank (WB) forecast is that economic growth will drop to 0.4pc in FY23 against 2pc, estimated in January, and 5pc achieved during FY22. The Asian Development Bank sees a growth rate of 0.6pc.
And as a result, WB projects that poverty measured at the lower middle-income poverty line ($3.65 per day 2017 purchasing power parity per capita) would push 3.9m people into poverty this fiscal year compared to FY2022.
The Federation of Pakistan of Chambers and Commerce and Industry (FPCCI) has rejected the policy rate by 100 basis points (bps) to an all-time high 21pc on April 4 aimed at taming super inflation. The FPCCI noted that the benchmark interest rate has risen by a whopping 1,125bps in the last 14 months but has failed to check inflation.
Inflation is stated to be the worst form of taxation as the authorities now collect more tax revenue from the surge in prices of goods and services than from economic growth.
Inequalities in human capital outcomes have widened over time between the rich and the poor, men and women, and urban and rural areas
There are widespread complaints that the taxation system is imbalanced and unfair as the bulk of the revenue is collected from indirect taxes, burdening the poor and less privileged beyond their capacity to pay.
A Senate Committee was recently informed by Pakistan International Airlines that 15 of the airline’s pilots had left the country because of major pay cuts in the form of high taxes.
It is argued that taxpayers can be encouraged to voluntarily and fully discharge their tax liabilities if every rupee of tax collected is well spent. The mode of taxation and the way tax money is squandered does not enjoy social sanction.
And international lenders like the International Monetary Fund (IMF) and friendly countries are losing confidence in Islamabad’s ability to carry out its part of agreed programmes linked to any bailout. Only China has helped Pakistan to avoid debt default through $1.8 billion refinancing and a rollover of old debts of $2bn in March.
Facing the risk of foreign debt default and the delay in disbursement of the $1.1bn IMF tranche, frustrated Finance Minister Ishaq Dar says Pakistan must end its dependence on the Fund.
Dwelling on the issue of public debt, an eminent financial analyst finds no evidence yet of firm resolve in implementing major structural reforms for progressive resource mobilisation and eliminating extravagance in the current expenditure. This will continue to impact the current account deficit.
Pakistan has also been very slow in investing more in intangible assets, such as design, branding and software, than in tangible assets, like machinery, buildings and computers. According to noted scholars, this is the main source of long-term success in advanced countries.
That brings us to the issue of human resource development. Human capital makes up 61pc of Pakistan’s wealth, yet its level of human capital is among the lowest in the world, says the latest World Bank report. About 90pc of the formal and informal workers are employed in micro-enterprises.
Inequalities in human capital outcomes have persisted or widened over time between rich and the poor, men and women, and urban and rural areas and among the provinces.
The report suggests that if Pakistan could achieve its Human Capital Index value at the average level of South Asian peers and (no less importantly) bring the use of human capital to employment outside farming, the country’s GDP per capita would rise by 144pc, eight times more than business as usual.
Simultaneously, brain drain has assumed serious proportions. According to a media report quoting the Bureau of Emigration, 92,000 highly qualified professionals such as doctors, engineers, Information Technology experts and accountants left Pakistan in 2022, mainly for the Middle East, in pursuit of decent jobs and dignity.
The main reason behind poverty in the country is the non-utilisation of natural resources appropriately, says Federal Minister for Water Resources Khursheed Shah. He suggested that 15pc of the GDP should be annually budgeted for the construction of small and big dams. According to experts, mini-dams are an effective tool for poverty reduction.
Published in Dawn, The Business and Finance Weekly, April 10th, 2023