The International Monetary Fund tells us that Pakistan’s economy has improved due to prudent monetary and fiscal policies, strong capital inflows, robust remittances from abroad and lower oil prices. Good news about Pakistan is always welcome.
In its analysis on the Pakistan economy, UK-based publication The Economist tells us that visitors to Pakistan are surprised to discover a strong business culture and good roads as the country is mid-table in the World Bank’s ease-of-doing-business rankings, well above India. This goes against the image of Pakistan as a place where only chaos and terrorism prevail.
The good news is that Pakistan is enjoying a rare period of optimism for its economy. While our media focuses with all that is wrong in the country, some sections of the international media talk of a thriving stock market, a stable currency and low inflation.
And that is not all. Highlighting Pakistan’s economic performance, The Economist reports that the IMF expects that Pakistan’s economy will grow by 4.7% next year, the fastest rate in eight years. Consumer prices rose by 2.5% in the year to March, the smallest increase for more than a decade. At the same time, the State Bank lowered its benchmark interest rate three times this year.
Granted the state of the economy doesn’t all have to do with government performance. The fall in international oil prices has been a big boon to the economy. In 2013-14 Pakistan’s net import bill for oil came to $12.6 billion. But if oil prices stay low, Pakistan could save a total of $12 billion in the next three years. This money can be used elsewhere.
And then there are some things for which the government can be credited. The Nawaz Sharif government has stuck to an IMF programme agreed to in 2013. Since then, foreign-exchange reserves have more than doubled, to $17.7 billion. The IMF released a tranche of $501 million halfway through its three-year programme ‘based on the solid progress’ made on Pakistan’s economic reform agenda.
So far so good. But international agencies and economists alike warn us that more is needed in terms of tax reform. Only one in 200 people who are supposed to file tax returns actually do so. That is why the government increasingly relies on foreign help or on indirect taxation to balance its books. Those who pay tax also pay more to tax officials as bribes and less to the national exchequer. It is a rotten system.
That is only one side of the story. A number of well to do Pakistanis point to the massive corruption in the government and the manner in which it spends money. Billions are spent on projects that never seem to come to fruition. Large chunks are siphoned off. There is no check and balance on government spending. Why would they give money to a government whose officials are only looking to enrich themselves.
Some taxes are seen as daylight robbery by businessmen. Take for example the case of the Gas Infrastructure Development Cess (GIDC) Bill 2015. In 2011, after the imposition of the GIDC during the Pakistan Peoples Party government, 3,500 cases were filed and the Supreme Court gave a stay order stating it was a fee and not a tax. Last year, the government again introduced the GIDC Bill 2014, which was rejected by all chambers across the country. Yet the government promulgated an ordinance in September. Terming GIDC as an “anti-business initiative”, trade chambers say such harsh steps raise the cost of doing business.
Many Pakistanis say they have no faith in the government. Many spend on projects of their own – building their schools and hospitals, given that the services provided by the state are largely below standard.
It does not come as a surprise that one recent report tells us that Pakistanis remained in pursuit of real estate in Dubai, in the first quarter of 2015 as third biggest amount of foreign property transactions $379 million came from Pakistani nationals. Pakistanis purchased properties worth over $4.3 billion in 2013 and 2014 in Dubai.
The state of the economy may be improving but it must be followed by an improvement in governance. It is a good opportunity for Pakistan to raise its economic standing but there is always the danger that some politicians will sacrifice the national good for their petty interests.
The Express Tribune, May 25th, 2015.
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