Growth takes the cake! – Opinion

Several leaders of economic teams around the world rely on data manipulation to show performance that is at odds with the realities on the ground, and yet, disturbingly, they have convinced many colleagues in the cabinet.

In democracies, unemployment and inflation, two indicators that have serious consequences for the political fortunes of any administration, are the focus of the government; However, in Pakistan, the focus has shifted towards growth, although with abysmally low levels of education, it is doubtful that this approach is finding too much traction with the general public.

Leaders of the Musharraf-era economic team consistently cite high growth rates (between 7 and 7.5 percent), rising industry share (from 22 percent in 2000 to 26.7 percent in 2006 ), the doubling of the share of gross fixed capital formation, an impressive performance of the services sector and, last but not least, with 82 mobile subscribers per 1,000 (versus 2 in 2000) as major achievements.

A 2005 report prepared by Nancy Birdsall, Adeel Malik, and Milan Vaishnav, Center for Global Development, for the World Bank’s Operations Evaluation Department noted that despite a massive increase in US dollar inflows during the Musharraf era , no doubt following the country’s decision to support the US-led war against the Taliban, “The people of Pakistan have suffered one of the most troubling development cases of growth without development. Pakistan made measurable progress in very few dimensions of development (economic, political or social) in the 1990s.

Even the most recent signs of progress in managing the economy and implementing reforms are not institutionalized or embedded in a resilient and transparent system of government accountability or adequate checks on abuse of power. Thus they may be vulnerable to the same setbacks that political change brought to past periods of apparent progress.

The previous government’s mantra that the country experienced a 6 percent growth rate in 2021-22, reflecting better performance compared to what was achieved during rival administrations, sadly supports the growth-without-development observation.

The four lessons learned detailed in the report need serious consideration as they remain relevant to this day. First, it is necessary to address the economic and political power structures. In the perspective of the decisions made during the last seven months, it can be assumed that extending the electricity subsidy to exporters and providing loans to the agricultural sector without any apparent mechanism to guarantee that the subsistence level farmers almost financially wiped out after the floods will be the only beneficiaries, they are policies that continue to provide support to the centers of the economic and political power structures in this country.

Secondly, improvement in social programmes, with the World Bank report stating that “with grossly inadequate levels of public spending in the social sectors, encouraging higher spending on social services makes sense, but only given concomitant improvements in the effectiveness of that expense. …and considerable attention to the empowerment and participation of communities.” There is no doubt that the Benazir Income Support Program (BISP) launched in 2008 has been a resounding success and was included in the Ehsaas program during the Imran Khan administration; however, its allocation since its launch has become insignificant compared to the total budget outlay.

BISP has been allocated Rs 360 000 crore in the current year’s budget, a vast underestimate as it predates the onset of the floods, although in comparative terms it is a considerable increase compared to the Rs 246 000 crore disbursed the previous year; and if you add in the widespread mismanagement and irregularities in social sector programs (as in other sectors/sub-sectors) as reported by the Auditor General of Pakistan year after year which are simply ignored by auditees, one is forced to realize account of the reasons behind a physical and economic collapse. social infrastructure.

Third, the report states that “leverage is elusive and its limits must be recognized in any strategy to encourage progress against poverty…not all loan eggs should be placed in the basket of Structural Adjustment Credits (SACs). . SACs should continue to be complemented by the Pakistan Poverty Alleviation Fund program and by smaller, more traditional projects”; however, today the influence of donor agencies is considerable. Successive administrations, through sustained flawed policies that support the elite and justify this support through the outdated trickle-down theory accompanied by the multiplication of current government spending, account for the need to obtain 40 billion dollars on transfers/loans only in the current year; and this will not be possible without the successful completion of the ninth review of the IMF.

The leaders of the current economic team, like the two leaders of the previous team, are so far apparently resisting attempts to implement the agreed reforms, however, with Fund staff evidently adamant that the next tranche will not be released. until all the preconditions are met, it is a matter of time until this team also capitulates.

And finally, governance is part of the World Bank’s vocabulary, yet “its context in the Pakistan program is still largely limited to administrative, procurement and financial issues. There is a need for a broader vision of governance, which includes the broader issues of local power relations; corruption, rule of law, etc.” In Pakistan, administration after administration has relied on tax amnesty schemes, be it PML-N, PPP or PTI, with the aim of increasing documentation and generating resources from those who have chosen to bank outside the country, whether politically exposed persons. (PEP), senior government officials, or those who engage in over-invoicing and under-invoicing.

Unfortunately, none of these schemes have paid the kind of dividends for tax collectors that were projected to be considered successful. To this day, most non-filers prefer to stay off the grid and pay a flat tax, an option the PML-N gave to those it considers its largest political base.

Many Western-based banks have asked their clients (both Pakistani and foreign) to close their accounts, no doubt due to questions about the source of their funds. And as rules governing tax evasion and avoidance have been endorsed by an increasing number of countries, including Pakistan, the potential for money laundering in the future is more limited than in the past, although some countries remain safe havens. In this context, it is relevant to note that the United Arab Emirates, a major destination for our PEPs and the elite, is on the Financial Action Task Force’s gray list.

Therefore, the path to follow would be twofold. One to focus on development rather than growth, especially consumption-led growth, both government and elite, and start making the tax structure equitable, fair and not anomalous, and this requires that the tax rates should be reduced and there is an urgent need to drastically reduce expenses, especially current expenses.

Business Copyright Registrar, 2022

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