Just reading through the post-budget op-eds I’m struck by how @#(*8#$ difficult it is to govern Pakistan. It’s not just that there’s harsh criticism of the government’s economic policies, but what’s worse is that this criticism is equally strident from either ends of the spectrum thereby ensuring that no course of action will ever successfully quash the criticism.
Check out this diversity of opinion on the matter of subsidies to public sector enterprises:
In her critical look at the budget, Marvi Memon says:
Subsidies are also to be slashed – Wapda’s from Rs147 billion to Rs84 billion and KESC’s from Rs32 billion to Rs3 billion. This means that people better get used to a massive rise in their electricity bills.
Marvi Memon has, of course, been leading a people’s movement of sorts to regularize all sorts of government jobs.
Cyril Almeida on the other hand, decided to write a whole column called “the lost years” in which he argues that this government’s inability to tackle public sector enterprise spending will result in people looking back on this time as “the lost years”. By the way, if you read the text of the executive summary of the economic survey of Pakistan which he references in his article, you will be somewhat surprised at the conclusions he has drawn from it. Its tone is nowhere near as hopeless as he suggests that it is.
Since his political bosses care little about Rs250bn budgetary holes, Sheikh had to stick to the usual vague pledge to ‘restructure’ PSEs on an ‘urgent basis’.
(Thus far the government has actually done the opposite, saddling already inefficient PSEs with thousands of more employees in the hope of convincing voters it cares about workers.
Now both these sides are extremely scathing in their criticism of the government, despite the fact that they are saying two opposite things. The situation is further complicated by PPP’s own development as a political party. Remember for a moment PPP’s foundational principles of Islamic Socialism. Also, consider the political stance of popular PPP politicians like Raza Rabbani against privatization.
Throw into this mixed bag of opinions the Council of Islamic Ideology which urged the speedy abolishment of interest.
Then you have the government’s own coalition partners – Farooq Sattar of the MQM, the ostensibly pro-business party and himself a federal minister, actually disowned the budget in the national assembly on the grounds that there was nothing in it to “bridge class differences”. I didn’t realize that he was expecting the French Revolution!
The thing that really gets to me is that everyone is so busy shouting these scenarios of doom and gloom that they ignore issues that really do need some serious thought. For example, there is the issue of Sindh’s dispute with the centre regarding the implementation of VAT. According to the FBR, it is going to be impossible to implement a non-integrated VAT, the problem is that Sindh is exercising its right (given in the 18th amendment and the NFC award) to collect sales tax on services. All the other provinces have surrendered their right to collect VAT on services to the FBR but Sindh has established its own revenue board for the specific purpose of collecting GST (or VAT) on services. I don’t think the answers to these questions are very clear and perhaps the consequences of a “wrong” approach on this issue won’t be qayamat. But it’s still something that needs to be thought about.
I haven’t seen one single op-ed on what should the country’s priorities be – should the principle of fiscal federalism be prioritized over the desirability of replacing GST with VAT? Is there a way to develop a VAT model that takes into consideration the desire of the federating units to levy their own VAT? How should provinces build their capacity for revenue collection? Can we even be called a federation if most of our tax revenue is collected by the FBR? Interestingly MQM, the party which made a special note of writing in its notes to the 18th amendment that it favoured devolution to the lowest levels, hasn’t been the slightest bit interested in participating in this most important debate between Sindh and the centre while Punjab, the largest province, hasn’t been at all interested in developing its own revenue generation capacities.
I get that people are emotional about stuff like power loss and power tariffs, but I really wonder at the irrationality of the public discourse on the economy. We can’t decide if we are socialists, Islamists or neo-liberals. We want the government to be all those things simultaneously – pro-poor, libertarian with respect to taxation, an efficient runner of public sector enterprise without resorting to the bogeyman of privatization, a firm rejecter of all IMF/World Bank dictation and aid, and preferably, we’d like a way to achieve all this in an interest-free Sharia compliant way!