The sufferers are the poor alone
By AMANULLAH BASHAR
May 21 - Jun 03, 2001
There can be no second opinion about the fact that
the poor of this country are the real sufferers of the ever-growing
external debt which has narrowed down the breathing space for the
have-nots of this country. The backbreaking burden of the taxes,
charges, surcharges and additional surcharges levied even on the
essential items like electricity or POL products is becoming unbearable
with every passing day.
Pakistan's total external liabilities were piled up
to the size of $37.8 billion on June 30, 2000 which certainly have
gained more heights during the period spanned over June 30, 2000 to June
According to figures released by the State Bank of
Pakistan, Pakistan's total external debt outstanding on June 30, 2000
was $32.7 billion or 53.8 per cent of the GDP. If other foreign exchange
liabilities such as foreign currency accounts are added, the total
external liabilities rise to $37.3 billion or 61.3 per cent of GDP. Debt
servicing on account of these liabilities amounted to $7.8 billion or
95.9 per cent of the country's realized export earnings in previous
financial year. The picture for the current year to be ended on June 30,
2001 more or less is same as it was last year.
Neither during previous year nor in the current
financial year, the economy was able to pay the amount for debt
servicing or to meet economy's demand for imports, more than half of the
contractual debt servicing has to be rescheduled.
The financial experts while analyzing the economic
conditions hold various governments responsible for throwing the economy
into the swamp of external and internal debts. They say that instead of
developing a just taxation system for collecting revenues by expanding
the tax base, they found it easy to borrow to run the state affairs in a
lavish style. The corrupt government officials took advantage of the
cumbersome tax procedures for personal gains. According to a tax payer
who for example pays Rs10,000 to the tax department, has to pay another
amount of Rs10,000 and another amount of Rs5000 for other expenses. In
all, he has to pay Rs25,000 out of which only an amount of Rs10,000 goes
into government exchequer. It is the complexities in tax system, which
made the situation worse confounded.
The temptation of the kickbacks never allowed
creation of import substitutes with the country; hence the current
account deficit continues to grow.
The corrupt system never allowed the national economy
to develop its own means or resources, hence reliance on the borrowed
money either for debt servicing or to meet day to day expenses is now
the culture of the economy.
Although the Federal Finance Minister Shaukat Aziz
has expressed his confidence that the country has the potentials to get
back its economic independence and has claimed to double the exports
within next 4 years.
The IMF has acknowledged the economic reform agenda
on which the present team of the economists is working, yet it has
pointed out certain areas, which need improvement.
The areas identified by IMF where pace of structural
reforms need to be accelerated to provide a level playing field for
private economic activities and restore investors confidence in
Pakistan's economy. The areas where pace of reforms has to be
accelerated include taxation, energy, and financial sector including
IMF delegation led by Clausse Enders feels that
structural reform process was slow in these areas which include tax,
energy, financial and trade sectors. Structural reform agenda must take
precedence over all other issues in the coming budget for 2001-2002.
These reforms must contribute to development of transparent and
predictable economic and regulatory environment that would help provide
equal opportunities to the private sector to grow and stimulate the
return of private capital to Pakistan.
About reforms in tax and customs sector, the mission
maintained that the objective could be achieved through measures that
simplify the present system and broaden the tax base in a fair and
In the energy sector, the objective was to fully
liberalize energy imports and prices while privatizing or restructuring
state corporations of the energy sector under the supervision of the
transparent and autonomous regulatory bodies. IMF has also called for
allowing these regulatory bodies to work independently and without any
pressure from the government. These bodies desired to be fair with the
corporations and the consumers as well.
In the financial sector, IMF recognized that progress
was being made in the area of de-regulation, restructuring of the
state-owned financial institutions and in the area of the financial
transparency and accountability of the Central Bank. But it says that
more was still to be done in this regard.
Whatever the outcome of these suggestions may be, the
fact remains that the borrowers have no option but follow the
suggestions of the lenders.
In order to avoid sorrows of the borrowing, though it
is too late yet there is no option but to learn to live within means
both by the ruled and the rulers.