The Package
When Moeenuddin Qureshi was selected by consensus as a neutral person who would be a credible Caretaker PM entrusted with the responsibility of holding free and fair elections in the country, the internationally renowned economist factor was taken as an additional plus point to deal with an economy in dire financial straits. In less than a month he has put in motion for implementation such politically tough decisions that we used to write and dream about. For many years the vast majority of the people of Pakistan have suffered while their leaders have dithered and played politics about doing the right thing, suddenly out of the blue comes a person who not only promises to do the correct thing, he proceeds to act upon them. Unfortunately the financial cupboard is so bare, his parallel economic decision to increase prices across the board will effect the masses who will have to bear further privation due to commensurate rise in prices of essentials. This burden may become politically unbearable despite the obvious necessity in the adverse economic circumstances.
Tax on agriculture income on the basis of Produce Index Units (PIUs) has been tried twice in the country and then aborted because the majority of our legislators are wealthy landowners who would much rather levy taxes on others through the elected Assemblies but manage to stand in the way of taxation on themselves in the sense that charity begins at home. An unreal situation was in vogue where 1.2 million urban taxpayers (more than half salaried employees) were sharing the income/wealth tax burden to support the revenue generation required to sustain 120 million people. It is a wonder that this much-burdened Atlas did not shrug (with apologies to Ayn Rand). Agriculture income had become a common tax shelter and the affluent could flout their wealth without fearing registration as tax-payers. Wealth tax was the very least that could be inflicted on the landed rich, one considers that 4,000 PIUs (50 to 60 acres depending upon location and region in contrast to Sartaj Aziz Agriculture Commission recommended 3,200 PIUs) quite generous and an adequate cut off point to protect not only the small farmer but also the middle income farmer. Collection of the proposed wealth tax has been decentralized to the Provinces who in turn should not get a share of the Federal Budget as is the present fashion. While the proper mechanism will have to be analysed for loopholes before putting in place, the Federal deficit will be brought to almost zero.
The only difference between those who commit armed robbery at a bank and loan defaulters who manage to get these written off is the volume of cash. A President of a major bank asserts quite proudly that he does not really need security services for the cash money transfer between Bank branches because he has a Banker’s Insurance Policy that covers the Bank for such losses. Leaving aside the fact of callousness about the priceless lives of Bank Guards lost during vulnerable trips in soft-skinned vehicles, what about the money robbed by the defaulters which runs into many thousands of times the amount robbed by dacoits? Is that also insured? And what about the Presidents/senior officials of Banks involved in the siphoning off of funds? The government has done extremely well by disqualifying those who have defaulted on loans from standing for elections, the full list must be published so that the general public has the opportunity of indicating those electoral candidates who may have given a wrong certificate to the Election Commission. And why should we stop at elections only, why not let the blacklist be circulated to all the banks and government departments for deletion from loan requests, contract evaluation, etc? If Moeen Qureshi is really sincere about going after the wrongdoers let him give the private sector an incentive to identify hidden wealth, giving them 20% of the amount recovered as reward. One or two Bankers owning inordinate wealth are presently engaged in the exercise of somehow making their past bright with the Income Tax Department but there is enough evidence readily available to make a start with them. If Mr. Moeenuddin Qureshi means business, let us start with the Milkens and Boevskys of this country so that a clear signal goes out about the will and commitment of the Government to practice what it preaches and that it will not be selective about those whom they prosecute.
The State Bank of Pakistan (SBP) has rightly been restored to its rightful independent autonomous status. This is as should be. With no aspersion on Mohammad Zaki, the Chairman Pakistan Banking Council (PBC), who is a fine, upright soul with great integrity, a Banker to be proud of in the national context, the PBC is an anomaly that must be consigned to history as soon as possible. SBP must have pre-eminent position in not only governing the monetary policy but also the functioning of the banks who now look to the Ministry of Finance rather than the SBP. In Mohammad Yaqoob, the new Governor SBP, Ashraf Janjua and Sibghatullah, the Deputy Governors, you could not have a better triumvirate ensuring the sovereignty of monetary decisions without being subjected to political considerations. There is a limit to how much money can be printed before it becomes worthless, the making of SBP all powerful without being subject to government interference will save us from using wheelbarrows in the future to carry cash to buy a loaf of bread, a la circa Germany late 1920s and Brazil present day where Cruizeiro notes are used to make paper airplanes.
Relief has been given to Governments but one believes not enough. The government servant is universally held to be corrupt, it is mostly because he is forced to because of the circumstances of the living standards around him and his family. One believes that at the very minimum average corporate salaries and benefits must be taken as an indicator (this should take a blue ribboned Task Force the most part of one solitary day) and that indicator should be applied as a national wage standard. Many government servants are living hand to mouth, a pittance of Rs.100 would only marginally increase the morsels. Justice (Retd) Samdani has been given a mandate to go after the corrupt among the bureaucracy, why not publicly ask the general public (with incentives for information leading to confiscation if not declared in wealth statements) to give details of property acquired by civil servants. The masses will only be too glad to help because they are the worst affected by the nepotism and corruption.
Very rightly, drug barons are being targeted. Unfortunately those who want to give evidence against this powerful mafia frequently disappear or lose their voices or suffer from temporary blindness. Drug barons can only be fought through a war without parameters by a silent combined Task Force coordinated by the Army. The influence their money commands must be minimised. One cannot depend upon our present drug enforcement agencies as they are badly infiltrated by those corrupted by the drug barons.
The common man is already under strain because of the massive devaluation, despite the Government’s commitment inflation is rampant with respect to essential commodity and consumer prices. While the raising of wheat and vegetable ghee prices will preclude smuggling to neighbouring countries the availability in plentiful thereof in our market shelves may reflect affordable prices, the fact remains that this is another whammy on the poor miserable poverty stricken soul at the bottom end of the receiving line. Sugar prices may have been reduced by reducing import duties but this just manages to sweeten the bitter pill we must swallow. The rise in fuel and electricity charges will cause spiralling inflation, at this stage it could well have been avoided. The Government must keep a strong check on the prices of essential commodities and consumer prices, it cannot do to have them become rampant all over the market. If forced to the wall the common man could well react, all the good work that Moeen Qureshi may do will then become counter-productive. Already voices have been raised that this is total capitulation to the World Bank and IMF. Investment in the Social Action Programme is a good and sound decision, for social benefits to the employed, a real social security programme is envisaged. Why not identify those companies from the private sector, industry and services, who pay the maximum deductions for ESSI and EOBI country-wide and invite their nominees to participate in managing these funds for the benefit of the low wage employees.
Moeen Qureshi did touch on certain other areas, not everything can be specified in such short an article. However one thing is certain, one does feel apprehension whether anyone will allow his proposals, some of which have remained on the anvil for some time, to be implemented. The Presidential Ordinance will expire if not given legislative approval, one does not see the legislators, most of whom are usually agriculturists, reluctant to roll back agriculture tax. If Moeen Qureshi can get past the promises and enaction stage, the Caretaker PM will have become politically potent despite himself. If the inflation does not tar and feather him in the eyes of his countrymen, a hung Parliament may well see him being invited to continue in office as PM of a national government. There are some who see him even as a possible dark horse for President but the mass reaction to the inordinate rise in prices may tend to make this a stillborn prospect. Mr. Qureshi may become a reluctant aspirant for elected office inspite of himself, one must remember he was reluctant to be Caretaker PM even but then he seems to have taken to the job like fish to water, with a certain relish and thankfully for Pakistan, with an honest, positive intent and purpose. One only lives with the fear that the massive increase in the prices of essentials will invite mass public reaction which may drown his entire programme.
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