Coming months for Pakistan
Everybody is confused and worried that what would be the future of Pakistan in the coming months. Apart from this one fact is clear, like, a visitor went to a zoo and saw a lion and a goat standing in the same cage. He appreciated for the harmony and asked that how management has succeeded in getting this harmony. The management said that by putting a goat each day in the cage. This is how people of Pakistan are being treated every day. Each day they are sacrificed to create this kind of harmony and at least all political parties, elites, religious groups and all powerful institutions have consensus on this.
In this context recent example is multi-party protest meeting of 17th January 2018 led by Dr. Tahirul Qadri and joined by Asif Ali Zardari and Imran Khan that has ended in Lahore with different rhetorics. General observations are that participants were lacking energy by seeing Imran Khan and Asif Ali Zardari together sitting in different sessions and without seeing each other’s face confirming the fact that PTI and PPP cannot move together. Secondly, Asif Ali Zardari named Nawaz Sharif as Mujibur Rehman of Pakistan without looking into the fact that Bhutto has also played some role in dismemberment of Pakistan. Imran Khan and Sheikh Rashid sent “lanat” i.e. shame and curse on the current parliament. This has started another debate that how far both are respectful to an institution elected by the people though it has lot of flip sides. Imran Khan has said that he has used very light words for the parliament. The question is that whether Imran Khan can tell that how serious he remained in attending parliament sessions and making it a viable institution.
The seats were vacant in the meeting or were overcrowded with millions is another debate.
Apart from this, media is also playing partisan role in this respect. People who entered from film industry into the media as anchors are making the role of media questionable through their partisan role. Media should always remain objective without siding anyone. But this element is missing right now.
Hence all political characters and institutions are looking busy in maligning others with some targets in their sights. The month of March is the first target when position in senate would change. If current governments succeed reaching March then it would be a victory for PML-N and PPP but on the other side PTI with other forces is trying to bring down the current governments before March. The second target is whether to go for election or to install an interim government. United States and its allies with 37 countries group of Saudi Arabia are working on their own agenda for Pakistan. CPEC is one of the targets for which India, USA and GCC countries are on one page. If CPEC succeeds then on the one hand it would provide gas to China and Pakistan and it would increase influence of China on GCC countries on the other.
Pakistan was in fact required to pursue reforms to improve its entrepreneurial environment and facilitate private-sector development. The financial sector was needed to undergo modernization and restructuring. However, overall progress lags significantly behind other countries in the region. The tax system is complex and inefficient, although reforms to cut tax rates broaden the tax base, and increase transparency have been taken half heartedly but not on equitable basis. Reliance on indirect tax remains the main feature of tax collection.
On the macro-economic outlook, all multilateral agencies are acknowledging that Pakistan has done somewhat well by achieving 10-year high growth of 5.3 percent in financial year 2017. The pitfalls lie in revenue mobilization, exports and remittances.
This goes along with the fact that recently government has announced that 60 million Pakistanis are living below the poverty line, posing a challenge for the country. The new poverty line estimates the number of poor households at 6.8 million to 7.6 million. Pakistan’s per capita income has marginally grown to $1,561. GDP Growth Rate in Pakistan averaged 4.91 percent from 1952 until 2015, reaching an all-time high of 10.22 percent in 1954 and a record low of 1.80 percent in 1952.
Now come to the education, despite an increase in the 2017/18 education budget Pakistan’s current expenditure on education is the lowest in South Asia. Around 24 million children are out-of-school, the second highest figure in the world after Nigeria.
According the Pakistan social and living standards measurement the literacy rate is 59 pc for males and 25pc for females.
Now come to the health side. It is still 0.7% to 0.9 % as percentage of GDP whereas in neighboring India it is above 1%. However it has to be above 4% in any case. No hospitals or worst hospitals with no infrastructure and medicines are lying everywhere.
The worst side is our revenue that has now crossed Rs 3.3 trillion this year but without surpassing Rs 5.0 trillion we cannot narrow our fiscal deficit. For this Government is doing everything to squeeze the common man and saving elites who are getting amnesties time and again. With no one within tax network, big business men, doctors, engineers, real estate owners, builders, feudal lords, wholesalers, retailers all are exempt from tax deductions.
Number of active tax payers/filers may reach above 1 million this year. Taxation in Pakistan is a complex system of more than 70 unique taxes administered by at least 37 agencies of the Government of Pakistan with no legislation for services, agriculture, wholesale, retail sectors to bring them in to tax net.
The main point under discussion by political parties and even military is increase in debt including external and domestic that was Rs 13.8 trillion in 2016 and now Rs 15.3 trillion in 2017. However this does not stand astonishing as it is 67-70% of GDP whereas in Japan it is above 200 of GDP and in USA and UK it is above 100% of GDP. The problem is that whether it has been used wisely without corruption and whether you have the capacity to repay it.
Our reserves have also declined to US $ 19.7 billion this year as compared to $23 billion last year.
Due to being security state, our defense budget is Rs 920 billion this year with Rs 12.5 only for clean drinking water, National Services with Rs 48.7 billion, hospitals with Rs 10 billion, higher education with Rs 38 billion. After 18th amendment Provincial Governments are looking after health and education but they have no plans, no backups no checkups with allocation of meager amount on these areas.
According to Federal Budget of 2017/18 with an outlay of Rs 4.75 trillion, 30% is for debt servicing and 19% is for defence budget. So with remaining 51% you have to run the country and with collected revenue of Rs 3.3 trillion you have to borrow Rs 1.4 trillion through external or domestic means to run the country.
Since Pakistan is a security state hence security and economy are interdependent on each other with an edge for security expenditure. So Government in these conditions is required to look towards economy and Armed Forces with backing of all political forces should look towards maintaining law and order.
But with current instability no body is clear about future of Pakistan. The things would remain so by mid of 2018. Let us see what happens before and after that.
Chairman Centre of Advisory Services for Islamic Banking and Finance (CAIF), former Member of IFSB on Islamic Money Market, former Head of FSCD SBP, former Head of Research Arif Habib Investments, Member visiting Faculty/ KASBIT/BIZTEK/Sheikh Zayed Institute University of Karachi/PAF KIET/MAJU.