Pakistan : Terrorist Wahabi Islamic Rep Pakistan 6

[Naresh]

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[url="http://www.dawn.com/wps/wcm/connect/dawn-content-library/dawn/the-newspaper/editorial/economic-mess-470"][color="#FF0000"]Economic mess :[/color] Dawn Editorial[/url]



Pakistan’s economy is a mess. Growth remains sluggish, not least because of falling investment, energy shortages, political instability and an unfavourable security environment.



Inflation is resurging and the rupee showing signs of weakness. The fiscal deficit is estimated to have swelled to 6.2 per cent of GDP last year from an earlier official forecast of 5.1 per cent. Could these be the signs of reversal of the recent economic gains? That will be too early to say though the country’s future economic outlook remains precarious. The country’s economic future largely hinges on external capital flows. But, as things stand today, financial support from the International Monetary Fund (IMF) and other donors is likely to get delayed due to Islamabad’s failure to hold down its fiscal deficit to the agreed level and implement Value-Added Tax (VAT). It is important that the government took convincing steps to show to the world that it is serious about fixing the economy. The curtailment of unproductive expenditure and increase in tax revenues will be a crucial step in this direction.



The failure to boost tax revenues has led the government to cut price subsidies and development expenditure. But it has done nothing substantial to plug the leakage of about Rs200bn through various loss-making state-owned entities like PIA, Pakistan Steel Mills and the railways. The cut in ‘wasteful’ price subsidies alone, though necessary, will not help. These measures have only spelled more difficulties for the man on the street. The budgetary deficit is growing in spite of the massive cuts in subsidies and reduction in development budgets. Besides, Islamabad should also take the provinces on board on its economic policies. Its finance managers blame provincial deficits for the widening of the fiscal gap. Now they want the prime minister to intervene and convince the provinces to slash their expenditure to help cut the overall fiscal deficit. The provinces are required to create a surplus equal to 1.5 per cent of GDP this year for controlling the overall fiscal deficit.



The provinces, however, should be cautioned against axing their development spending to throw up surplus. It will hurt the poor and result in the loss of more jobs.



Also, the prime minister has been requested to defuse political opposition to the implementation of VAT, which is crucial if tax revenues are to be boosted for development. It remains to be seen if the chief executive of the country will be able to neutralise opposition to the tax. If that does not happen, the country will actually risk the reversal of the economic gains of the last 20 months. That will be disastrous for both the country and its people.



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