Need for reform not only public, but also economically

 

Pakistan's economic situation necessitates creative thinking and a clearly defined strategy. The game of assigning blame, in which each new government places blame on its predecessor, has come to an end. They expect the incumbents to show them how to solve their current issues, particularly inflation. All governments are afraid to make difficult but necessary decisions for fear of alienating the awam (public), facing attacks from opposition parties and the media, and losing political capital. Let's see where this anxiety fails.

Maintain a reasonable level of reserves and reduce the fiscal and current account deficits to manageable levels so that the adjustment path to stabilizing the economy (structural reforms) can resume sustained growth without the need for exceptional financing from domestic lenders, the IMF, and other creditors. Reduce the CAD by maximizing forex earnings through export promotion, attracting FDI, and facilitating remittances. This necessitates minimizing the domestic industry's protection to increase export market profitability. As a result of this strategy's expansion of the export industry and FDI, thawayam would not have to pay excessive indirect taxes.

On the fiscal front, the best course of action is to collect taxes from individuals, businesses, and sectors that are not included in the tax system, privatize or restructure state-owned enterprises (SOEs), particularly energy companies, switch to targeted subsidies, and implement pension reform. Thawardam would not have to pay any additional taxes because they are already exempt from paying direct taxes. On the other hand, if large and medium landlords, businesses, real estate developers, and owners are taxed, the GST rates on essential goods, which are disproportionately borne by the poor, can be reduced. As a consequence of this, the manufacturing sector—which is responsible for two-thirds of all taxes—would also be able to free up capital, increase capacity, or establish brand-new businesses. Because domestiproductionve capacity is insufficient to meet demand, growth spurtincreasein imports. Employment would either be created directly or indirectly as a result of new investments. The fear of expanding the tax base has nothing to do with thawayam; Instead, elites who live extravagant lives and do not pay taxes worry about losing their privilege.

Privatizing, leasing out, or restructuring SOEs is the other option. This would require investments, loans, grants, subsidies, and guarantees. Public finances are being strained by these SOEs. As an illustration, we ought to take the banks, which were compensated for their losses; They owe about Rs200 billion in taxes because they were privatized. Circular and contingent debt has been exacerbated by subsidies for electricity, gas, fertilizers, petroleum products, wheat, and administered prices. Energy companies ought to become more competitive at the retail level for the benefit of customers. The "single buyer, single seller" model ought to be replaced by multiple sellers and buyers. All political parties should praise the Benazir Income Support Program, which is a blessing for Pakistan. It should be used to pay for specific subsidies for energy, food, and fertilizers, saving Rs300 billion to 400 billion annually. The pay-as-you-go pension system ought to be converted to a defined contribution system to avoid the imminent pension bill explosion in the medium term.

With additional taxes collected and savings from spending reductions, it should be possible to increase access to health, education, nutrition, water supply, sewage, and other essentials. The Sehat and Kisan Cards, educational stipends, school lunches, and private-public partnerships in education and healthcare could guarantee this access. Investing in research and development, rural infrastructure, and input supplies can reduce the import of farm products worth $7 billion to $8 billion and increase agricultural productivity. When formulating policy guidelines, monitoring outcomes, and auditing accounts, provincial governments ought to devolve these subjects to local governments, earmark financial resources, and delegate powers to tax property, fees, cess, and user charges to this government tier. Annual revenues for provincial governments can range anywhere from Rs500 billion to Rs600 billion.

This illustration suggests that the outspoken assertions that reforms would be detrimental to the awam at, a clever ruse to protect the interests of the elite that are represented in positions of decision-making, such as politicians, bureaucrats, military officials, large businesses, large landlords, judges, and others who stand to benefit from the status quo. In other words, the assertions that reforms would be detrimental to thawayam are false.

This discussion raises the following inquiry: What is the appropriate ratio and order of financing and adjustment (reforms) under the IMF program? Depending on the pace of the adjustment, difficult decisions can be made before the executive board gives its approval, and financing can be spread out over a long period. The other option is to introduce substantial financing relatively early to relieve liquidity pressure, reestablish reserves, and permit subsequent adjustment measures. The executive board's decision is heavily influenced by the borrowers' past performance. Pakistan's credibility as a long-term borrower is low and its track record is poor; As a result, the burden shifts from financing in stages to adjustment first. The three-year program would include twelve reviews. When a review is completed, a tranche can only be released quarterly. Performance standards and structural benchmarks are agreed upon with the borrowed to monitor progress. The most recent data is used to evaluate any modifications. To account for deviations from the program's initial assumptions, adjusters and waivers are used.

Pakistan's economic managers, on the other hand, want to put off some conditions to get financing first. The approach of seeking financing from friendly nations and then approaching the IMF board to relax implementation timelines is one attempt to alleviate the liquidity pressure. However, the program's external financing requirements already include these sums; The Fund may agree to advance payments because these are not additional funds. Nevertheless, this would undoubtedly have an effect. The price of delaying the adjustment measures is increased uncertainty and distortions, which may necessitate even more stringent policy measures. There is a widening gap between the official and unofficial markets as a result of parallel markets preventing the flow of export proceeds and Remittances Money Eye hoarding is already taking place to the economy in the right direction, pay off debt, end our excessive reliance on the IMF, and avoid escalating crises, we require a leadership style comparable to that of a statesman who is willing to put iinineintereststhe line. Other nations have done this. Why don't we?