In the month since the United States and Israel launched attacks on Iran, a growing fallout on the economic front with global consequences has hit countries, including Pakistan, hard.
The latest blow to Pakistani consumers came just this week, with a sharp rise in the domestic price of high-octane fuel used in luxury vehicles. This was apparently aimed at forcing the relatively wealthy to bear a higher cost of the national burden, which now overwhelms oil-importing countries around the world.
However, this last measure shows again that the government depends more on symbolic character than on substantive action. Across Pakistan, many areas require urgent action to address the growing economic challenge posed by the Iran war.
Pakistan has long remained a country where the relatively few well-endowed elites have remained immune from sharing the national burden. It is no surprise that only about three percent of Pakistan’s population of 250 million is registered as tax filers, and that even fewer people contribute to this cause in any meaningful way.
Meanwhile, a history of largesse showered on the rich and powerful only reinforces a tragic trend: in everyday life, Pakistan remains a country where privileges fall to the privileged few. This story is well illustrated by examples of the ruling elite over time, heading to prized destinations abroad for medical treatment, while similar quality treatments are available in Pakistan.
In another relevant example, the government of Pakistan provides higher education institutions, including many that remain abandoned and in disrepair. Pakistan’s education system has visibly fallen over time, as the country’s elite have ignored this area while sending their own children to high-profile educational destinations around the world. Similar examples are found in all sectors, reinforcing the powerful reality that Pakistan’s well-endowed elite remains virtually isolated from the rest of the country.
As the future of the war against Iran remains impossible to predict, Pakistan’s ruling establishment must resolutely prepare for the worst. Although Pakistan remains afloat today, helped by an IMF loan, it is important to remember that Pakistan came back from the brink of defaulting on its foreign debt just a few years ago.
While today Pakistan remains solvent with the support of the IMF, this, at best, cannot be the solution to a deeper challenge. In short, Pakistan needs to rebuild confidence in its future, remain independently solvent through significant improvement in its balance of payments and, last but not least, improve prospects for future economic growth.
For now, Pakistan remains trapped in a cycle of low growth, which at best matches the country’s annual population growth. In other words, the size of Pakistan’s economic pie grows annually by the same margin as its population growth. Arguably, this can be seen as a cycle of marginal growth or no growth.
Looking ahead, Pakistan must undertake three interrelated reforms to prepare for the future. First, amid the growing global fallout from the war against Iran, it is important to force Pakistan’s elite to tighten their belts like never before. For example, luxuries granted to elected representatives in the past must be suspended immediately so that Pakistan can implement long-delayed spending cuts.
Furthermore, high net worth individuals across the country should be forced to meet their genuine tax obligations, rather than contributing only token amounts. In recent years, other classes, such as visibly well-endowed merchants, have successfully resisted budget measures to contribute more to national tax collections.
As Pakistan faces one of the most difficult times in its history, no one can be allowed to evade its tax obligations. This is essential to prevent the future burden from being imposed across the board, in particular through greater reliance on indirect taxes.
Secondly, while Pakistan faces a formidable war-related challenge, the country also faces another major challenge that should not be ignored. The powerful reality of climate change and its subsequent destruction could be witnessed across Pakistan just last year, when unexpectedly heavy rains caused widespread destruction and human displacement across the country.
Even before this year’s expected rain cycle, Pakistan’s disaster management officials have already warned of an upcoming spell that could exceed last year’s by at least 20 percent. This requires the country to redouble its efforts to refocus on the agricultural and forestry sectors, in response to the dire consequences of climate change.
Beyond the climate-related challenge, focusing on agriculture may be the fastest way to revive economic growth while addressing the growing food insecurity of recent years.
Lastly, Pakistanis are known to be generous donors to causes within their own country. But harnessing this spirit for a greater cause requires urgent action to intensify the work of the nonprofit sector across Pakistan.
Together, the path to change must be adopted immediately as Pakistan faces the consequences of a formidable global challenge.
The writer is an Islamabad-based journalist who writes on political and economic affairs. He can be contacted at: [email protected]
Disclaimer: The views expressed in this article are those of the writer and do not necessarily reflect the editorial policy of PakGazette.tv.
Originally published in The News
