Where to Go?
Pakistan’s political and economic crises are not the result of any particular event in the recent past; it is the accumulated result of the actions taken, especially after 2000.
Muslims of the Indian sub-continent got an independent state in 1947. Since then they have been dealing with one primary question: where to go? Or what were the objectives of the newly-formed state in areas which for centuries remained part of one unit called the Indian subcontinent. The party leading the movement, the All India Muslim League, never had any concrete and comprehensive economic plan for the independent Muslim state. The Indian National Congress, on the other hand, had one in the form of ‘Karachi Plan’.
The leadership in that party, including the chief, belonged to the legal community and not a single person in the initial team had any educational or professional background in economics and finance. Thus, the first finance in charge was adopted from the bureaucracy. This umbilical defect has not been corrected in the last 75 years and even today when the country is in serious economic chaos the elite as well the masses do not attribute it to the lack of economic planning.
Pakistan’s political and economic crises in 2023 are not the result of any particular event in the recent past; it is the accumulated result of the actions taken in the past, especially after 2000. The biggest politico-economic event in the history of Pakistan is the separation of the Eastern wing in 1971. There are thousands of pages describing the politico-military answers and excuses for the happening of that event, however, nobody is ready to analyse if there was any economic policy error that alienated our brothers on the Eastern side of the United Pakistan. In short, rightly or wrongly, they were not happy with the economic policy adopted by the state dominated by the people from the Western side. Same is the case again in 2023. There is a serious fear of the unknown including an inevitable default, but as a nation there is no action being taken except more and more blame games. The only action undertaken is that more loans are being begged, further mortgaging the future of our generations to come.
Finance and Economics, unlike many other subjects, relate to the future events. A day that has passed becomes irrelevant and with each new day, there is a need for food, medicine, education, housing, security and transport. All these ‘worldly’ things are essential, more equally like faith, for a human being, be him a Muslim or non-Muslim. Every society is required to provide the same to its citizens on a daily basis. The state cannot absolve of its obligation by transferring the blame to the people that they are not law-abiding, etc. This requires economic planning and a role of the state. If the state fails in doing so then it becomes a rule of the jungle where might is always right as is now happening in Pakistan.
It is unfortunate that the state of Pakistan is gradually failing in all its obligations. Amongst other negative aspects of this situation, the biggest question that starts creeping in societies like ours is that when the state is unable to fulfil its five primary obligations, namely food, health, housing, security and transport, then why should people finance the apparatus of the state by taxes? This dilemma has started appearing in the country and as a state the country is not able to generate reasonable taxes by way of direct taxes. Around 70 per cent taxes are collected by way of indirect taxes which further aggravates the situation. High incidence of indirect taxes and low base of direct taxes is the best empirical evidence of a failing state.
No state can remain isolated or disengaged with its neighbours for a long period of time. In the similar vein, no state can live on foreign aid and borrowing for all times to come. Pakistan as a state has been doing the same since its inception. It has strained relations with at least two major neighbours for the last 75 years whereas the other remaining neighbour state Iran is in a camp other than Saudi Arabia, which is our main lender of last resort. In other words, we are not comfortable from all three sides of our borders. It is for this reason we have been spending around 4 per cent of our Gross Domestic Product (GDP) on defence, which is not sustainable for a vulnerable country like Pakistan.
The writer is former chairman of the Federal Board of Revenue (FBR).
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