Nawaz Sharif and the PML-N regime have been under a lot of criticism over the last few years, which escalated especially after the leader himself was disqualified in July, 2017. The critique on the government ranges from corruption to declaration of an ‘emergency situation’ over the debt piling up on the nation. Imran Khan, the chief of PTI, has taken political speeches to a new level where he openly declares the Former Prime Minister and his Finance Minister as the “Dacoit” and “Hitman” of Pakistan, respectively. “Foreign investment stands at its lowest-ever position. [Foreign] investors stay away from Pakistan because of corruption of federal ministers and the Sharif family,” Imran said in a recent speech. However, apart from the verbal accusations at Sehwan, the grimacing PTI chief also threw a lot of facts and statistics to highlight the murky economic performance of the country. According to Imran Khan, Pakistan collects a gigantic amount of Tax revenues every year amounting up to Rs.3500-4000 billion, however, according to him all is lost due to the negligence and corruption of the politicians. Imran Khan declared the current government a continuum of the previous ‘Dacoits’ who are the principal reason why each and every citizen in Pakistan owes a national debt of Rs.120,000.
Imran’s allegations present an open case for discussion, analysis and further probing by all the economists, analysts and political enthusiasts within the country. A rational approach would be to take the allegations one by one and analyze whether they’re mere words or if true, then to what extent.
The first and the foremost allegation hinges on corruption, where political parties take the center stage and blame PMLN for reaching a historical rate of corruption. Pakistan is ranked as the 4th most corrupt country in the Asia Pacific region as per a survey conducted by Transparency International. The bribe rate was reported at around 35%, and 60% people had to give bribes to obtain ‘justice’ from the courts. What more could reveal the shackles of corruption within the country than the recent disqualification of the Prime Minister and allegations against most of the top notch politicians ranging from Jahangir Tareen to the Finance Minister himself.
The second issue highlighted within the economy by the opposition is the tax revenue discrepancy of the Federal Bureau of Revenue (FBR). Pakistan has missed its tax revenue target for FY2016-17 by an amount of Rs.225 billion; while the difference between expenditures and revenues has surpassed the target of 3.8% for the year. FBR is stringently monitored by a ‘Special Assistant to Prime Minister on Revenue/Minister of State’. Millions and millions of rupees are spent under the Tax Administration Reforms Programs, however, the reality is the Tax to GDP ratio has gone downhill since 2002 after peaking at 12%. Every other day, our FBR chief and tax collectors blame commoners and businessmen on tax evasion when more than 88% of the tax revenue is coming from indirect taxation. Even after the Panama and Bahamas Paper fiasco, acts like Protection of Economic Reforms Act 1992 remain intact with unrestricted remittance of income to and from the country by the top notch businessmen. Many elected members and seasoned politicians leverage on the nontaxable ‘agriculture income’ laws and there’s no check and balance on the millions rather billions of rupees transacted under this clause. The fiscal deficit keeps widening and rich keep getting richer by hiding their cash flows covered under the blanket of the favorable clauses and exemptions. FBR Chief and the whole system are responsible for the debilitating case of declining tax revenues in Pakistan.
Lastly, political opposition has been blowing the trumpet of circular debt and incremental expenses as an emergency situation in Pakistan. Exports have fallen to $21 million from $25 million in 2011 and the Nawaz Regime has added a $35 billion to the external debt in the past four year. Pakistan’s gross external debt as percentage of exports was 193.2% in 2013; and this ratio deteriorated to 294.4% as of June 2017. Ishaq Dar has been clarifying the increasing debt in terms of the infrastructural investment on CPEC and how analysts are lumping together various debts to present a grim picture. However, the point of concern is, no matter who is lumping what together, the debt has risen by $35 billion on the balance sheet and the nation with its crawling exports has to take remedial steps to service this debt. Imran Khan or any other political party around the globe would criticize the debt piling up on the bare shoulders of the population.
As of now it is established that the tax reforms aren’t working as they were expected to and perhaps FBR is lax in taking any action against the ‘mightier ones’ and the debt is increasing. Does that imply that Pakistan has failed economically? The most succinct answer is a two letter word, i.e., no. Pakistan, like any other country, has its share of corruption and high levels of debt. Tax revenues never really improved despite a variety of regimes and policies implemented by different governments over the years. Nothing can justify all the wrongs happening in the system right now, but it’s noteworthy to emphasize what’s right as well. The agricultural sector has grown by 3-5% during the last four years coupled with a 6% growth in services. Energy production touched a new peak around May, 2017 and a total of 30,000 MW is going to be added in the national grid as per plan. The economy is further expected to pick up if things go as per plan in projects like CPEC and Gwadar Port expansion. Overall, it can be safely assumed that yes while certain quarters may have a grim and gloomy outlook on many fronts, as does Imran and many others, yet the economy and the state hasn’t failed and there are positive aspects the country can still hold onto.