WRITING OFF LOANS OF FARMERS
PARLIAMENTARIANS SHOULD BUILD FAVOURS FOR AGRICULTURE TAX
TARIQ AHMED SAEEDI (firstname.lastname@example.org)
June 1 - 7, 2009
On the way to win over the hearts and minds of public, successive governments in Pakistan have been exonerating borrowers from the responsibilities of loans repayment to banks and development financial institutions. Often, this amnesty is given to selected group of people, and both criticized and welcomed. Knowing the real intention of behind-the-scene prepared accords, some people are used to take harshly in to account loans pardoning facilities awarded to revealed insolvents, arguing public wealth is wasted in drain by not verifying genuinely inabilities to repay and thus cancelling outstanding dues. Big loans writeoffs in previous governments are example of this. A spate of condemnation was raised from all section of the society against government writing off loans of several industrialists and politicians. People, however, praise the similar facility carried forward on humanitarian grounds. For example, when the last government wrote off loans of people affected severely by earthquake in 2005, people appreciated the action as humanitarian.
It may be worth recalling that government pardoned loans amounts of Rs260 million of people mainly residing in the then North West Frontier Province after the earthquake rendered huge losses of lives and wealth. While categorization of borrowers is made in accordance with their inability to make repayment before the state exerts executive power to write off loans, generally the reprieve is granted on the basis of declaration of bankruptcy by debtors, veracity in whose claims is sometimes messaged. This wrongs amnesty, depriving original claimants of due rights. Government writes off loans sometimes to shore up sectors under financial stress. That it absolves entire sector or specialized borrowers from repaying dues happens rarely.
The instance emerged recently when present government waived off all loans disbursed to farmers in the Malakand division. Premier Syed Yusuf Raza Gillani has declared the region war-torn and in order to get the farmers living in the area out of financial obligations he announced writeoffs for them. That what would be the implications of this on upcoming budget remains to be seen, one thing is evident however that this withdrawal would be like an indirect financial aids to war-ravaged agriculture community whose work has been adversely affected because of ongoing fight between militants and military. A hard-pressed victim of this battle has been farmers' community whose routine works have not only been disbursed but owing to their departure from their locations they have also been dispossessed of sources of income. Therefore, implementation of writeoffs would give them a sigh of relief in this testing time.
Nevertheless, calamity should not become sole criterion of writing off loans especially of farmers since this would make palatial the otherwise an ordinary service extended to agriculture sector in several agrarian economies which either soften repayments on agriculture loans or write off debts summarily to give impetus to growth driven sector. In India, this has been integrated in political strategies to garner support of masses. Congress-led United Progressive Alliance triumph in election has been driven by its government's masses friendly measures in the last term. It put forward several agriculture reforms and more importantly it wrote off Rs65 billion agriculture loans in the last term. This is a kind of initiative rarely, rather amount wise never, taken in Pakistan while agriculture is the backbone of Pakistan's economy with thus far contributing significant portion of almost 25 percent in national GDP. Given the unsustainable standing of the sector, that if this percentage point remains stable is questionable.
Until government takes unconventional courses of action to improve the performance of agriculture sector, there might not be affirmative answer. It is interesting to note that agriculture sector will play an important role in triggering economic growth of Pakistan in years to come, according to different economists. In fact, partial results of this current fiscal year also showed that dampening demand pressures were supported by the sector. Clearly, that implies superfluity of potentials embedded in the sector to inject vigour in to economic activities. However, this all depends on government's facilitation services to agriculture. Among them is financial inclusion of agriculture sector in length and breadth. Right now, a large part of it has no access to financial support programmes of government.
Loans writeoffs could be an effective incentive to stir underlying potentials. Government should remember the concept of resource utilization that is based on the cornerstone of sustainable income. Proposed taxes on income of agriculture can provide government with additional revenue that can be spent on improving performance of agriculture. Imposition of taxes is need of the hour since government has to reduce fiscal deficit and shorten expenditures. This reduction would not allow it to continue subsidizing that is however essential to weed out infrastructural weaknesses. Any new tax revenue would be for the greater advantage of the sector if it is used legitimately. Based on mutual assistance approach, tax revenue generated from income on agriculture production is ultimately to be utilized for the sector. That is why, all tax payers demand government to levy income tax on agriculture. It is to be seen what is in the next budget in this regard. If government has decided to go along with popular views on taxes, then no wonder a healthy source of revenue is awaited for farmers' community at large. In contrast, if it has dared not to afford resentments of anti-agriculture tax powerful lobbies even then, it is suggested that parliamentarians (out of landlords' clouts, how many are there?) for public sake should rekindle alter egos to pass bill in favour of agriculture tax.