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EDITORIAL: Finance Minister Hammad Azhar should welcome the advice, however unsolicited, that came from the Pakistan Business Council (PBC) because the lobby group representing major corporations and banks didn’t just mention all that is wrong with the economy but also pointed out what can and should be done in the immediate term to keep things in order. In a congratulatory letter welcoming the new finance minister, PBC CEO Ehsan Malik appeared particularly concerned about the 27 percent increase in the power tariff at a time when expensive energy has already rendered industry uncompetitive, because it will increase the burden on “honest consumers” and is simply “not a growth driver”. The corporate sector is also understandably unhappy about denying the five main export sectors “energy at a regionally competitive cost” and also forcing captive power producers to switch to the grid even though its reliability is “yet unproven”.

Clearly, the country’s Big Money has had it with all the “inefficiency and losses of transmission and distribution” which Pakistan Tehreek-e-Insaf (PTI) made a lot of noise about before coming to power but hasn’t done much about since winning the election. Not much has changed in the last few years and now they seem to have had enough of unnecessary costs eating up parts of their usual profits. Yet, surely, PBC’s letter spoke for everybody when it expressed strong reservations about the 27 percent increase in the tax target for FY22. With Federal Board of Revenue (FBR) reforms still nowhere in sight, despite all the promises and predictions, PBC rightly fears that fixing such a target is unrealistic and would squeeze the small band of existing taxpayers mercilessly. It went on to add that such measures not only accelerate the informalisation of the economy, but amount to killing the goose that lays the golden eggs. There is weight in this argument because the government will gain precious little, at the end of the day, if it sets unachievable targets to comply with the International Monetary Fund (IMF), squeezes taxpayers even further, and then still fails to achieve them.

Hammad Azhar didn’t really need to become finance minister to understand how little there is to choose from when it comes to toggling the economy. And now that he has settled into his new job, for all intents and purposes, he would have found out just how unpopular some of this government’s decisions have been with the people and how there is a need to take yet more difficult ones just to keep the bailout programme from collapsing again. It’s not that we, as a country, have not seen such times before. It’s just that now the point has come when the economy can no longer keep up with this recurring habit of instituting reforms that never work and setting targets that are never achieved. The need of the hour, as PBC very rightly said, is to take the first steps in the long processes that will ultimately deliver what is really needed. Meantime, authorities must very seriously consider retaining some measures that were taken to see the economy through the lockdown, especially by the State Bank of Pakistan (SBP), for at least another two years.

The Temporary Economic Refinance Facility (TERF), for example, which led to a Rs400 billion investment in plant and machinery and an almost Rs300 billion investment in land and industrial buildings, worked very nicely but lapsed in March. Such steps stimulated the production drive that drove up employment and helped the economy weather the Covid storm, and there is every reason to extend them. Other measures, too, such as concessional loans to businesses to prevent retrenchment till the worst of the pandemic is over, should also be strengthened and reintroduced. Such measures can provide support in the near term while the government goes about the long-term work involving targeted, deliverable reforms and expanding the tax base. But the government will have to have a very clear priority list; something that at least the finance ministry hasn’t really had for the last few years. Therefore, any advice that comes from groups and sectors that create jobs and push the economy forward should be given the attention it deserves, and there was much in PBC’s letter to take very seriously.

Copyright Business Recorder, 2021

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