AGL 37.70 Increased By ▲ 0.13 (0.35%)
AIRLINK 132.60 Increased By ▲ 0.10 (0.08%)
BOP 5.60 Decreased By ▼ -0.04 (-0.71%)
CNERGY 3.82 Increased By ▲ 0.05 (1.33%)
DCL 8.70 Decreased By ▼ -0.17 (-1.92%)
DFML 40.65 Decreased By ▼ -0.35 (-0.85%)
DGKC 88.60 Decreased By ▼ -1.56 (-1.73%)
FCCL 35.46 Increased By ▲ 0.38 (1.08%)
FFBL 66.15 Decreased By ▼ -0.35 (-0.53%)
FFL 10.40 Increased By ▲ 0.25 (2.46%)
HUBC 109.03 Increased By ▲ 2.63 (2.47%)
HUMNL 14.45 Increased By ▲ 1.05 (7.84%)
KEL 4.84 Decreased By ▼ -0.02 (-0.41%)
KOSM 7.14 Increased By ▲ 0.29 (4.23%)
MLCF 42.49 Increased By ▲ 0.69 (1.65%)
NBP 59.85 Increased By ▲ 1.27 (2.17%)
OGDC 184.25 Increased By ▲ 3.00 (1.66%)
PAEL 25.75 Increased By ▲ 0.05 (0.19%)
PIBTL 5.92 Increased By ▲ 0.09 (1.54%)
PPL 148.19 Decreased By ▼ -0.21 (-0.14%)
PRL 23.30 Increased By ▲ 0.08 (0.34%)
PTC 16.60 Increased By ▲ 1.36 (8.92%)
SEARL 69.40 Increased By ▲ 0.61 (0.89%)
TELE 7.28 Increased By ▲ 0.04 (0.55%)
TOMCL 35.70 Decreased By ▼ -0.30 (-0.83%)
TPLP 7.55 Increased By ▲ 0.15 (2.03%)
TREET 14.24 No Change ▼ 0.00 (0%)
TRG 50.83 Decreased By ▼ -0.02 (-0.04%)
UNITY 26.53 Increased By ▲ 0.13 (0.49%)
WTL 1.22 Increased By ▲ 0.01 (0.83%)
BR100 9,791 Increased By 23.3 (0.24%)
BR30 29,783 Increased By 382.8 (1.3%)
KSE100 92,128 Increased By 190 (0.21%)
KSE30 28,739 Decreased By -4.4 (-0.02%)

EDITORIAL: Pakistan Stock Exchange remains sluggish with brokers citing the delay in the staff-level agreement on the ninth review with the International Monetary Fund (IMF) as the reason for its lacklustre performance.

Often cited by our successive finance ministers as an indication of the state of the economy and by implication their performance it must be borne in mind that the stock market - merely a collection of shares of public companies - is significantly smaller than the economy and the poor, the lower middle and the middle income earners in Pakistan rarely, if ever, invest in the market.

The key stock market players, other than around 40 plus stock brokers, are limited to the upper middle to upper income earners and corporations, and bearish and bullish trends appear to suspiciously mirror mounting and/or easing criticism against the economic team leaders.

Statistics reveal that our stock exchanges are one of the lowest taxed in the region with collections of 5.6 billion rupees in 2021-22 and July-todate 4.3 billion rupees while collections in India, upped tenfold this year, are expected to generate 60,000 to 80,000 crore rupees as tax on capital gains in the stock market against 6,000 to 8,000 crore rupees last year.

Repeated advisements subsequent to undertaking detailed studies on various sectors/subsectors, be it donor funded or government funded or indeed funded by private research institutes around the country, continue to gather dust in various ministries with their recommendations remaining unimplemented.

Finance ministers, reappointed with regularity in spite of their appallingly poor performance - their selection a function of the government in place with clear institutional favourites - have all failed to deliver during the past three decades and instead have simply exacerbated problems through flawed policies and/or lack of clout within the power structure to challenge measures taken on political as opposed to economic grounds. And the result is for all to see: the current economic impasse which is deepening with each passing day.

Take the example of the country’s tax structure that remains heavily reliant on indirect taxes, whose incidence on the relatively poor is greater than on the rich.

If withholding taxes in the sales tax mode, an indirect tax, that are inaccurately credited to direct taxes as pointed out by the Auditor General of Pakistan, are taken out from the equation then indirect taxes account for nearly 70 to 72 percent of all revenue collected in this country.

The incumbent finance minister has bafflingly legitimised the non-filers (particularly traders) and absolved them from filing their returns and instead levied a higher sales tax on their purchases. This is without doubt a disincentive for the honest tax filers.

The power sector’s financial crises are also deepening with time and managers continue to pass on the sector’s inefficiencies and corruption onto the hapless public through raising utility rates and are at present, like in the past, trying to pass on the resulting political backlash onto external donors/IMF for insisting on full cost recovery, an economically sound policy instead of embarking on a reform agenda that would improve the power sector’s performance.

Rising budget deficits, with more than 90 percent allocated for current expenditure continues to this day and component allocations are justified on the following grounds: (i) rising annual mark-up and debt servicing though none of the repeat finance ministers have had the gumption to acknowledge that their policies contributed to ever-rising cost of borrowing.

Dar increased reliance on external borrowing (2013-17) by arguing that the rate of interest abroad was lower than domestically while artificially controlling the rupee rate, thereby showing low mark-up and principal payments as and when due in the budgets. This flawed policy accounted for Imran Khan inheriting the worst-ever current account deficit.

Dr Hafeez Sheikh, during his first term as the finance minister, failed to implement tax and power sector reforms agreed with the IMF which led to the suspension of the programme and during his more recent stint agreed with the Fund to raise interest rates and opted to reschedule debt at 13.5 percent discount rate – another contributor to the ever-rising cost of past borrowing.

And Shaukat Tarin, like his predecessors and successors, delayed the Fund review for more than six months on the mistaken assumption that the same geopolitical situation as in 2008 prevailed in 2022 that had macroeconomic repercussions; (ii) defence which needs to be streamlined and barring ongoing operational expenses all other items must be cut as all must sacrifice to deal with the existing impasse; (iii) civilian administration also needs to be slashed, again required to sort out the ongoing economic stalemate; (iv) continuing untargeted subsidies in spite of having the mechanism to target them, i.e., through Benazir Income Support Programme (BISP).

One would hope that BISP with only 400 billion rupee allocation this year is raised as subsidies are phased out; and (v) pension reforms are critical and for this not only increasing ghost pensioners need to be identified but also a contributory system needs to be put in place.

As matters stand today and the policies being supported today there does not appear to be too much hope for a better future in near future. The finance minister blows hot one day and cold the next with the Fund that is simply increasing the trust deficit, which is at the cost of the country today.

His statement that the IMF needs friendly countries, Saudi Arabia and the UAE, to guarantee 3 billion dollar already pledged assistance to Pakistan is believed to be inaccurate as the amount is at least double that as determined by both domestic economists and the Fund.

It is about time the eleven-party coalition government revisited the composition of its economic team that has not only failed to deliver but is creating impediments to the success of the ninth review.

That the country needs implementation of the reform agenda without any further loss of time is a fact. This newspaper starkly warns that there is no room for complacency on economy.

Copyright Business Recorder, 2023

Comments

Comments are closed.

Muhammad Ali Apr 01, 2023 09:42am
Lack of supremacy of law prevailing for last 75 years is mother of all problems. The lot of rotten group of people ruling for decades will eventually throw this country to a very deep ditch just to secure their personal booties. Everyone who have been in power from grade 14 to grade 22 has put his share. In case of imminent default, none will be safe.
thumb_up Recommended (0)
KU Apr 01, 2023 12:23pm
There seems to be a paralysis of common sense among the policy managers in government. But this was expected given the lack of IQ and greedy intentions. The economic distress has kicked up a chain of sequence that is initiating social chaos, social unrest, reduced trade volumes, currency volatility, breakdown of law and order, and the onset of bankruptcies. But, they are more interested in passing bills curtailing the powers of the judiciary and whipping up a constitutional storm to prolong their rule and get their criminal records wiped clean.
thumb_up Recommended (0)
Miannawazshit Apr 01, 2023 12:37pm
$ar is a liar and is wrecking what is left of the economy.
thumb_up Recommended (0)
Haq Apr 01, 2023 03:09pm
Needs to shutdown the incompetent govt, purge the country from corrupt ruling elite & go back to the basic ideology of Pakistan. Implement the laws of Sharia, as per Quran & Hadits
thumb_up Recommended (0)
Tulukan Mairandi Apr 01, 2023 05:13pm
On top of that, Hawala is used by Pakistani Importers to import various goods from Dubai, primarily what they call 'bharat halva', which is essentially indian processed human excrement, for mixing into meat in Pakistan. Alongside that, hawala is also used for import of detergents, gold, vehicles and machine parts too, from Dubai. This is like a leach on the economic blood.
thumb_up Recommended (0)
KhanRA Apr 01, 2023 05:26pm
I honestly don’t know what even the point of Pakistan is anymore if we have leaders like this. What did we do with our independence? We let crooks and idiots take control, and rule the country for their own families. Bhuttos, Sharifs, and the Army. We don’t have a country, just a vessel for the useless elite to accrue power and wealth. And we let that elite distract us from their disastrous economy and foreign policy disasters by their appeals to religion. Either we need a revolution, or just give up independence and ask to join India.
thumb_up Recommended (0)
Tulukan Mairandi Apr 01, 2023 05:40pm
Bharat halva is in short supply as of late since I've consumed most of it.
thumb_up Recommended (0)
Jomabti Apr 01, 2023 10:43pm
@Tulukan Mairandi, stop boasting because game changer CPEC will ensure we get much better quality excrement from China for our consumption, as compared to the India produced type. It's only due to CPEC delay due to Indian sabotage that we still import Indian halva via Dubai.
thumb_up Recommended (0)
TimeToMovveOn Apr 03, 2023 06:21pm
Here is the crux of your problem--your focus on Kashmir gave Pakistan establishment and outsized role in the country. This destroyed democracy. It destroyed the rule of law. It destroyed the economy. The Kashmir issue has not allowed Pakistan to move beyond the partition. That is why it is still stuck.
thumb_up Recommended (0)
A. Tahir Apr 05, 2023 02:09pm
"Pakistan: into the great economic abyss" Compliments of the Crooks & Coorupt Inc and its sponsors!
thumb_up Recommended (0)