EDITORIAL: News that the government has again caved into demands of the powerful zero-rated sectors, also referred to as export-oriented sectors, and offered them electricity at an all-inclusive rate of Rs19.99 per unit while domestic consumers are charged Rs40 per unit does not come as a surprise.
It turns out that the Rs20 billion subsidy set aside for them ran out in the first two months of the fiscal year, forcing the power division to stop the supply of concessional electricity from October. But they were still able to use their old pressure tactics to get the government to dole out yet more taxpayer-funded subsidies, despite the financial crunch and just when it is in the process of complying with IMF (International Monetary Fund) conditions to withdraw all subsidies, including those meant for domestic consumers and poor segments of society.
This is very disturbing on at least two counts. One, it is sure to cause more problems with the IMF when discussions for the release of the next tranche of the EFF (Extended Fund Facility) get under way. The facility has to be suspended every few months because the finance ministry cannot adjust its subsidies and taxes according to the deal it has signed with the Fund and has to be arm-twisted into meeting its contractual obligations each time.
And even though the so-called “prior conditions” become stiffer with each breakdown, which in the end troubles the common man more than anybody else, it’s as if the government has buried its head in the sand and keeps repeating the same mistakes.
Not surprisingly, nobody’s yet explained how this will be settled with the IMF, or what they’ll do about the pressure from these rich and powerful industries if the subsidies have to be removed mid-way through the fiscal once again, causing needless uncertainty for everyone.
The days when finance ministers would boast that they would get the Fund to understand Pakistan’s problems are long gone as even Ishaq Dar had the wind knocked out of his optimism in Washington when he met with IMF and World Bank officials. And it’s not as if friendly countries, some of whom have agreed to invest in the country, are going to subsidise the big boys of Pakistan’s economy with their taxpayers’ money.
And two, it also sets policy-specific progress back. When the two biggest sectors of the economy, agriculture and traders, are not taxed for purely political reasons, reserves are bound to suffer. These so-called zero-rated sectors have been living off the fat of the land since forever and still don’t have much to show in terms of aggregate growth.
Instead, they continue to rely on their political connections and pressure tactics to make sure that ordinary taxpayers, who are being stripped of all subsidies themselves, continue to bankroll all their excesses.
That’s not all. There are also reports that the equally (if not more) powerful sugar mafia has been up to its old tricks once again as the FBR (Federal Board of Revenue) conducts yet another investigation into involvement of big sugar dealers in widespread fraud and fake supplies of millions of tons of the commodity.
This industry faced its first crackdown in the time of the previous PTI (Pakistan Tehreek e Insaf) administration, which led to the famous breakdown within the party. But with time the government changed and the industry went right back to its old ways.
These are telltale examples of elite capture of the country’s politics as well as the economy. You can squeeze the poor to feed the rich for only so long, and with no more fiscal room in the economy, the off-again, on-again IMF programme, and record stagflation, the political and industrial elite expects the old way to continue at its own peril. It’s a shame that their alliance has wrecked the economy, if not the country, and still nobody learned any lessons at all.
Copyright Business Recorder, 2022