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People’s hardships amid bad governance   

Dr. Ikramul Haq & Abdul Rauf Shakoori

The holy month of Ramadan is being observed throughout the world by the Muslims with customary fervour—the 30-day fasting from dawn to dusk is obligatory for adults for strengthening the bond with Allah Almighty and solidarity with those lacking resources to meet both ends. This year, Pakistanis are observing Ramadan [that started on March 23, 2023] amidst extreme economic hardships with historic high inflation of 47% according to official numbers—independent estimates put the figure much higher. Undoubtedly, the prevailing politico-economic conditions are at their worst today in Pakistan which is in the grip of hyperinflation, particularly in terms of food.  

The perpetual political instability, unprecedented rains followed by floods last year and fiscal imbalances have added to the poor citizens’ miseries being forced to bear unbearable burden of exuberant indirect taxes to meet fiscal targets agreed with the International Monetary Fund (IMF) for revival of stalled Extended Fund Facility (EFF) programme of US$ 6 billion.

The ruling elites in Pakistan are not realizing that the prevalent economic difficulties are posing a national security threat. People on one hand are struggling to meet their basic needs and on the other are witnessing fight for power between political leaderships. Those in power are not bothered at all to address basic challenges in governance, judiciary as well as in fiscal affairs. The alliance government of Pakistan Democratic Movement (PDM) is still using conventional method/approach to provide relief to the poor—making them stand in long queues to get free bags of flour. Some have lost lives while many injured in getting these bags due to mismanagement and/or their old age. Despite widespread criticism from many quarters, the government is not taking any steps to improve distribution of flour to the needy and manage the overall issue of targeted subsidy through reliable data to ensure transparency.

The successive governments have miserably failed to create room for the labour class to enhance their earning levels. The higher and sustainable growth could have led to enhancing per capita income, productivity and tax collections. In spite of tall claims of documentation, the size of our informal economy is growing and is estimated to be at 35.6% which represents approximately $457 billion at GDP purchasing power parity (PPP) levels as per the World Economic Forum. According to the State Bank of Pakistan’s report the ratio of financial inclusion of Pakistan is not healthy. It reveals that 53% of adult population has not opted for financial inclusion. The economic policies of last many years, instead of adding any positive value, have negatively affected the country’s growth.

Though our debt burden in the last few years have gone up substantially, yet our growth has shrunk considerably. Resultantly, debt servicing is now consuming all available resources at federal level. This year net income (tax and non-tax) of the federal government will be even less than internal and external debt servicing. There will thus be nothing in the government’s kitty to improve already extremely low social indicators.

Besides monstrous debt servicing, energy sector circular debt is taking a heavy toll on our meagre resources. Though this issue is not new and despite knowing its huge impact on our national treasury, successive governments have utterly failed to address it.

The quantum of electricity sector circular debt in 2013 was close to Rs. 450 billion, but reached Rs. 1148 billion as on June 30, 2018. The Economic Survey (2021-22) citing the data of the Central Power Purchasing Authority (CPPA) mentions that circular debt stood at Rs 2467 billion by March 2022—equivalent to 3.8% of GDP and 5.6% of government debt. If allowed to grow at the current pace, it is estimated to reach Rs. 4 trillion by 2025.

The gas sector circular debt is also now close to Rs. 1600 billion, posing yet another challenge. It grew fast despite agreeing with IMF to take effective measures by the previous government of Pakistan Tehreek-e-Insaf (PTI) government. The IMF Country Report issued in February 2022 highlights the steps to curtail it by monitoring and aligning power tariffs with cost recovery levels, targeting power subsidies, implementing the renegotiated purchasing power arrangements, and pursuance of medium term reforms to reduce costs and current account deficit. Medium-term steps include working with the World Bank and Asian Development Bank to reduce commercial technical losses through introducing smart metering, cutting off delinquent consumers and scaling up the transmission and distribution infrastructure at par with generation capacity.

The measures further include improvement in the performance and accountability of the DISCOs and introduction of private participation, and progress with their phased privatization, offering fair competition and renegotiation of the Power Purchase Agreement with others. However, these steps have yet to materialize.

As per media reports, Prime Minister Shehbaz Sharif, recently formed a committee to chalk out terms of reference to handover DISCOs to the provinces. While this step would help curb theft in power sector it would also reduce burden on the federal government which should also come forward to address all steps agreed with the IMF to streamline energy sector related issues.

Moreover, the government should also take steps to improve its governance. Undocumented economy is a main hurdle in raising tax revenues. The government should opt for corporate model to run the country and should start registering all businesses, introducing licensing and reporting requirements. Labour laws also need to be streamlined to ensure that each establishment or facility observes 40-hours per week labour with minimum wage introduced by the relevant province or the federal government.

It is common practice that generally people and mostly business owners including shops force their employees to work over 16 hours a day without even paying them minimum wages. The Government should ensure that any person who works over eight hours should be compensated with overtime as per international standards. This would help poor workers increase their income thus improving our international ranking related to unfair and abusive labour practices.

The culture of running the country without transparency and accountability negatively affects every sector. Those who enjoy power take pride in violating the law. This has severely impacted democratic norms and caused an economic mess. We are under continuous monitoring by various global watchdogs, whether it is United Nations, International Human Rights Watch, Financial Action Task Force, International Labour Organization, Human Rights Organization or World Justice Project Report and our ranking by all these organizations is extremely poor. However, we have not yet demonstrated any seriousness to plug loopholes in our regulatory framework to address their concerns.

Interestingly, we are in the IMF’s EFF programme since 2019 and are bound to fulfill the agreed terms, introduce policy reforms, including regulating the State-Owned Enterprises (SOEs) laws, and improving effectiveness in business environment. However, during the entire period of current IMF programme, we have been violating the agreed terms on several occasions. For each violation, we had to face tougher conditions. Resultantly; we have ended up piling up extra burden on the poor people of our country. Though we have completed eighth review of the EFF programme, the ninth review was delayed. Now, despite meeting conditions, IMF is not ready to repose trust and is hesitant to sign the staff level agreement for release of the next tranche.  

The Parliament has recently passed the State-Owned Enterprises (Governance and Operations) Act, 2023 [“the Act”] that was supposed to be passed in the early stage of IMF programme in 2019. However, despite a four years’ delay, language of the law is too generic to meet the requirement of the IMF what to talk of bringing any improvement in governance and operations of SOEs. All conditions, policies and procedures mentioned in the Act are already part of Companies Act of 2017 and corporate governance regulations etc. Rather than wasting time and spending money in these sick SOE’s, the government should simplify privatization laws by ensuring transparency and accountability in disposing these loss-making entities.

The government would have to choose running commercial entities (either inefficiently or diligently) or concentrating fully on running the affairs of State under the supreme law of the land. Injecting taxpayer’s money in running these white elephants through incompetent bureaucracy is causing massive loss to the national treasury. Our resources are not keeping pace with our rapidly growing population. Continuous fiscal bleeding will lead us to anarchy that would ultimately pose a huge risk to our national security.


Dr. Ikramul Haq, Advocate Supreme Court, specializes in constitutional, corporate, media, intellectual property, arbitration, international taxation, IT and ML/CFT related laws. He is author of many books on law, economic and political history of Pakistan, drugs, arms, terrorism and related matters. He has been studying phenomena of arms-for-drugs, narco-terrorism and global heroin economy since 1979 and authored Pakistan: From Hash to Heroin and its sequel Pakistan: From Drug-trap to Debt-trap. He studied journalism, English literature and law. He is Chief Editor of Taxation He is country editor and correspondent of International Bureau of Fiscal Documentation (IBFD) and member of International Fiscal Association (IFA). He isVisiting Faculty at Lahore University of Management Sciences (LUMS) and member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE). 

Abdul Rauf Shakoori, Advocate High Court, is a subject-matter expert on AML-CFT, Compliance, Cyber Crime and Risk Management. He has been providing AML-CFT advisory and training services to financial institutions (banks, DNFBPs, investment companies, money service businesses, insurance companies and securities), government institutions including law enforcement agencies located in North America (USA & CANADA), Middle East and Pakistan. His areas of expertise include legal, strategic planning, cross border transactions including but not limited to joint ventures (JVs), mergers & acquisitions (M&A), takeovers, privatizations, overseas expansions, USA Patriot Act, Banking Secrecy Act, Office of Foreign Assets Control (OFAC).

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