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Nearly three years down the road after assuming office, the Coalition government, lead by Peoples Party  is in the grip of a multifaceted crisis of mind boggling proportions. The most important aspect of the present crisis is in the economy. Soon after assuming office, the government decided to sign an agreement with the I.M.F. (Feb.2009), despite the dismal record of this organization in the third world and especially in Pakistan during the nineties. Now the full burden of complying with the I.M.F. conditionality has broken the back of the common man, without bailing out the bankrupt economy.The loan of $11.3 Billion augmented the external debt of Pakistan to $ 52 Billion and the domestic debt to Rs.3 Trillion till Dec. 2009. Though the government claimed it as a great achievement, the country was once again caught in the classic debt –trap.

The debt trap is a complex phenomenon. Like many other poor countries of the world, Pakistan too, since its inception, has repaid debts (through repayment and debt-servicing) many times more than the amount, it owed to multi-lateral and bilateral creditors. But still the payable debt is very much there and growing. Pakistan has sold out a number of its strategic assets to repay debts. During the last 16 years it has sold out 116 state owned enterprises earning an amount of over Rs. 395 billions and rendering half a million workers  jobless.
Pakistan’s public debt has exceeded 90 percent of its GDP and debt servicing accounts for over half of current revenues. Now on the dictates of IMF the current PPP government is levying more and more taxes and making the lives of common people miserable. A most oppressive Value Added Tax is under way, to replace the Sales Tax. Severe pressure from IMF is mounting up to impose VAT if Pakistan really wants to obtain the tranche amounting to $3.1 billion out of the $7.3 billion that were earmarked for 2010.

As everyone knows, the favorite IMF  prescription is the”structural re-adjustment”i.e. (a) Privatization of public sector enterprises. (b) Termination of subsidies on consumer items (c) Increase in the tariff of public utilities such as telephone, electricity, gas and water supply. (d) Increase in taxes, majority of which comprises of indirect taxes. (e) Reduction in spending on public welfare i.e. health, education etc.

The government came out with the gimmick of Reformed General Sales Tax (RGST) at (17%), renaming the VAT and launching high pressure lobbying for its passage in the National Assembly. However, the majority of the parties in the National Assembly are opposed to the imposition of this unjust tax on an already overburdened public, especially when the Agricultural Sector remains free from taxation. As a matter of fact only three million people pay taxes in Pakistan out of a population of a hundred and eighty million. It is indeed the height of injustice that people earning millions of Rupees a year go scot free, when an ordinary citizen earning Rs.300000, is taxed at the source and again taxed when he purchases necessary items from the market !. The strong feudal and land owning lobby, which has resisted the imposition of Agricultural Tax for the last six decades and more, is responsible for this unjust and unacceptable situation. By an anomaly of the democratic process, the feudal and land owning elements are strongly represented in the National Assembly. This is the retrograde factor that is retarding the political and economic development of the country.

Let us not underestimate the noxious influence of this element. It is responsible for all that ails our body politic. Corruption, nepotism, obscurantism, bigotry and the systematic use of violence as an instrument of political coercion all have their roots in feudal class and its morbid culture. Though there is significant resistance to economic interests of the feudal class in the National Assembly, the out come is not certain as yet.Perhaps it will take a greater effort to convince the feudal and land owning class that they are not the ‘ Divinely Anointed’ beings they regard themselves as, and that all citizens of Pakistan are equal before the law. But till such time, the economy is bound to to remain moribund and the fleecing of the general population in the name of taxes will remain unbearable.    



  1. Pensioners going home without a pay-check is a tell-tale sign of Pakistan’s economy. The taxation system is fraught with thievery from the exchequer by tax functionaries and the wealthy. Imposing tax on agricultural income, products and services that constitute more than 20% of GDP is important as a matter of equal treatment of citizens. But such taxes could drive the cost up for consumers without being productive enough to make any significant contribution to the economy.

    Pakistan’s debt stands at $55 billion and assets owned by Pakistan’s military total to a similar amount. Even if the IMF tranche gets released after some horse trading and muscle-flexing in Islamabad, it would assure continuity of perks for officers and politicians for few more months. If Pakistan fails to service its debt, which it seems destined for, the economic hardship will intensify. Imagine the policemen and soldiers going unpaid for a month. Chaos, anarchy, lawlessness!

    Posted by Malik Rashid | January 3, 2011, 5:20 pm

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