Daily Times

When it comes to the economy, the Pakistan Tehrik-e-Insaf (PTI) government cannot have it both way. It cannot claim to be committed to converting the country into a welfare state, while proceeding with policies of austerity. In its amendments to this year’s budget, the PTI government had cut down development expenditures significantly. The rationale was that there is a severe balance of payments crisis, and strict measures ought to be taken.

That strict measures are needed to fix the economy is beyond doubt. But there’s still the question: who exactly will bear the brunt of these measures? Pakistani governments address the nation as if it’s a homogeneous entity and all citizens have similar socio-economic muscle to bear the brunt of ‘short-term re-structuring’. The reality is far from it, and the nation comprises households with varying levels of incomes and assets. So far, it has always been those on the lower end of the income- and asset- distribution who get to bear the brunt of austerity measures, while the elites and the upwardly mobile segments keep afloat, thanks to their economic muscle. All of this isn’t mere hogwash. Studies conducted by development organisations like the UNDP and Oxfam have confirmed that Pakistan has seen a surge in economic inequality in the past two decades even as its poverty statistics have improved.

This background is crucial to contextualize the latest round of talks with the lender of last resort which has had a crucial role in pushing the economic austerity agenda. From media reports on these talks, it appears that this time the IMF has dropped expenditure cuts from its list of demands. Instead, the global financial watchdog is insisting that Pakistan boosts its revenue generation capacity. The PTI government must use this opportunity, and take some strict measures. Only this time, these measures must cut into the privilege of elites, and let us spell it out clearly that it won’t happen simply by raising duties on Swiss cheese and luxury vehicles. For once, this country must urgently put into place a revenue generation policy with clearly set out targets for untaxed incomes generated from large agricultural farms, speculative real estate markets and the mammoth and undocumented wholesale and retail trade sectors.

The development cuts announced by the government after taking the reins of power will soon start taking a toll, and its impact will be felt disproportionately by income- and asset-poor households. To offset this, and to ensure that these cuts can be revised in future, the government needs such a revenue generation plan. We are well aware that this won’t be smooth sailing. The biggest impediment in the way of such a plan will of course come from within the ranks of unelected state institutions and the ruling party. In the former case, we have institutions that have been used to getting bigger and bigger slices of the pie, at the cost of equitable socio-economic development in the country. And, the ruling party has gathered on its platform all those elites who will get impacted if a truly radical revenue generation plan is afoot.

Thus, the challenge for Prime Minister Imran Khan and his team is to manage these in-house problems. No external solutions, whether from the IMF or individual states like China and Saudi Arabia, will work if these roadblocks aren’t tackled. *

Published in Daily Times, December 17^th 2018.