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Poor governance and unnecessary expenditures were the key challenges to the country, not the resources

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Islamabad: Fiscal resources is not the real challenge but it is the appropriate utilization, the country is facing the worst financial crisis of its history and the nation is looking at the budget as to whether it eases their ongoing sufferings or adds to their woes.

Dr Pervez Tahir, former chief economist at the Planning Commission of Pakistan, Sakib Sherani, Former Principle Economic Advisor, Ministry of Finance, Dr Athar Maqsood Ahmed, Head of economics department at National University of Science and Technology (NUST), Mukhtar Ahmad Ali, Executive Director, Centre for Peace and Development Initiatives (CPDI) and Hafiz M. Idrees of Income Tax Bar Association, Rawalpindi spoke at the seminar on “Forthcoming budget 2011-12: opportunities and challenges” jointly organized by Sustainable Development Policy Institute (SDPI) and ActionAid Pakistan. Dr Syed Nazre Hyder, Senior Economic Advisor at SDPI moderated the proceedings.

Dr Hyder maintained that the country had never before experienced such a grave economic situation as the country faces numerous challenges simultaneously while few options are available to policymakers to pull out the economy from the edge of abyss. He highlighted that the fiscal deficit was much higher than its target, revenue collection was not only short of target but also formed lowest tax-GDP ratio as compared to other developing countries, heavy subsidies to public sector enterprises, heavy payment of inter-corporal debt, inflation, unanticipated expenditures on rehabilitation of displaced persons, and rehabilitation and reconstruction of un-precedented flood-affected areas have been some of the key challenges.

He added that despite such a grave situation, the data regarding current account balance and exports receipts seemed satisfactory. “We have assembled here to think over as to how best the economic challenges to the country can be overcome and how the opportunities can be cared out to ensure optimization of available resources for positive economic trends for this country and nation” he underlined.

Dr Pervez Tahir recommended widening of tax regime instead of focusing more on current approach of reinforcing rigorous taxation on existing tax payers. He deplored that willingness or courage to improve the tax net was missing at all. He said the country has currently 2.4 percent growth rate involving 2.2 percent from services sector alone while the major sectors such as agriculture and industry were not contributing in this growth. He was of the view the various institutions are unable to perform their assigned tasks and roles adding that country’s biggest expenditure is military expense while the institution has been only efficient in governing the people whereas the performance is lost territory, failure to defend the nation and now failing to even defend themselves.

Sakib Sherani was of the view that there was no shortage of resources but the key challenge was efficient use of available resources which has not been happening in this country due to bad governance and unnecessary expenditures. Talking of estimated cost of bad governance, he maintained that over 700 billion rupees can be collected through widening of tax regime, 330 billion rupees can be saved by addressing leakages and irregularities in public sector expenditures and power sector crisis was also costing 3.5 percent of GDP.

“We have no fiscal constraints but we have institutional and governance crisis” he added. He urged that it was relevant to examine country’s context which will significantly impact the budget decisions adding that the weakest GDP, critically low financial indicators, all time high decreased large scale manufacturing investment, law and order and persistent energy crisis will impact the budget decisions.

He suggested that the export sector and over seven hundred thousand out-of-tax net Pakistan’s elite who were evading the tax should be brought into tax web which will contribute significantly into resource generation for country. He said that at least four principles should be considered into budget-making process which involved consideration of improving macroeconomic stability, tax burden sharing by powerful elites, social protection and keeping a deep sight of future challenges such as climate change, water crisis and debt-servicing.

Mukhtar Ahmad Ali highlighted low budgetary allocations for education sector and said that out of total less than two percent of education budget, 95 percent was allocated for salaries leaving very little resources for improving the quality of education. He lamented over missing focus on gender disparities in education and added that out of 42 new colleges and institutions built in 2008-09, only 8 were for women.

Dr Athar was of the view that currently country’s economy was in state of stagflation involving increased inflation with stagnant growth. “Our real concern should be to sort out combination of policies to come out of this grave crisis situation. We need to turn our attention towards bleeding public sector enterprises, more focus on revenue generation” he went on saying.

Hafiz Idrees highlighted inefficiency of FBR. Giving suggestion on broadening tax net, he proposed making National Tex Number (NTN) numbers compulsory for every transaction, sale, purchase, transfer and gifts. Also the agriculture sector should be brought under taxation. He proposed rationalization of different taxes and expansion of tax regime while ending double taxation.

For more information, contact:
Faisal Nadeem Gorchani
Coordinator, Policy Advocacy and Outreach
Sustainable Development Policy Institute (SDPI)
38 Embassy Road, G-6/3 Islamabad, Pakistan
Postal Code: 44000
Tel: +92-51-2278134, (Ext: 113)
Fax: +92-51-2278135
Cell: 00-92-333-559 2210
Email: main@sdpi.org

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