EDITORIAL: One by one the social spillovers of the financial meltdown are beginning to show. Now there’s a very visible trend of reverse migration as high cost of living is forcing many low-end workers to send their families back to their villages, breaking households and in many cases pushing children out of school as well.
Such things are natural when anemic growth, a debt bomb, currency crisis and record inflation and unemployment send the economy into a tailspin, even if all that does not change the fact that the people that suffer most had nothing to do with policy blunders that broke the economy and ruined their quality of life.
Ordinarily, you’d expect such trends to be transitory, and reverse not long after the economy successfully negotiates the downturn. But this time might be different, at least for a very long time. The government can offer no tax or subsidy relief as long as its hands are tied by the fiscal crisis and the IMF program.
The tight structural adjustment assures a long period of contractionary fiscal and monetary policies, which means more unemployment down the road even if high interest rates can somehow rewrite the rulebook and cut cost-push inflation in the near or medium term.
That makes it more likely that many bread winners will have to join their families back in the villages instead of the other way around.
This is a very grim, vicious circle, and Pakistan is now at the centre of it. Sadly, even now the government is not listening to intelligent advice from all around, especially IFIs (international financial institutions) that keep us afloat, and there’s no effort to bring big, politically connected sectors into the tax net.
The old way of hopping from one bailout programme to the next is not going to work anymore. For, it is precisely the harsh conditions of the Stand-By Arrangement (SBA) – reforms that were long overdue – that is at the heart of this reverse migration, among a host of other indicators.
And the government, unable to provide any relief, will remain helpless so long as it avoids increasing tax revenue; which can get a many-trillions-worth shot in the arm just by making agriculture, real estate and wholesale sectors pay their fair share of taxes.
Let there be no mistake that this crisis, where we are perilously close to default and economic destruction all the time, is of our own making.
All administrations over many decades, regardless of the party in power, have been equally guilty of making honest, hard-working taxpayers pay for the theft and corruption of the rich, powerful and influential.
And now there’s nothing left to squeeze out of them. So a country with the fifth largest population in the world, and horribly high poverty and illiteracy rates, sits on an economic-cum-social time bomb that its rulers made for it.
People, especially those forced to part with their families because of the greed and incompetence of the upper classes, should demand that political parties explain what they plan to do about the tax collection dilemma before asking for their votes. With elections just around the corner, this needs to become a pressing concern for everybody.
That’s because tax reforms will route previously conveniently uncollected sums, running into trillions of rupees every year, promptly into the kitty. And then the government will be in a far better position to negotiate lighter conditions for remaining tranches of the SBA as well as future programmes that will be necessary to keep default at arm’s length. Until then, the ordinary people of Pakistan are condemned to live the ordeal that our leaders are fully responsible for.
Copyright Business Recorder, 2023
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