Rolling up the sleeves

As noted regularly in these columns since the new government came to power it has no choice but to pick up the legacy of its predecessor. Economically the country is in trouble, foreign reserves are leaking away, inwards investors lack confidence and a dysfunctional tax regime all contributes to a bleak picture. Curative measures are going to be inescapably painful. The Economic Advisory Council (EAC) is calling for what it calls ‘tough decision making’ within the first two months reasoning that the electorate are going to be able to absorb significant changes to the 2018-19 federal budget sooner rather than later.

The EAC said that changes to the budget had to be ‘realistic’ and based upon ‘ground realities’ which include revenue and expenditure projections. The previous government had been generous in its tax exemptions and discounts and these may be among the first casualties of the new austerity. The reversal of pro-rich decisions that could see a Rs90 billion cushion added to the treasury is not going to be easy, but the alternative is to squeeze the middle and lower classes with large rises in the cost of electricity and gas.

Most of those at the EAC meeting — which included representatives from the private sector in a welcome move — advocated the expansion of the tax net which is easier said than done, and an end to the expansion of subsidies which in the case of the all-important textile sector is going to be deeply unpopular given the state of the industry anyway. The PM was present in the chair and said that the EAC should formulate recommendations which the government would implement irrespective of the political cost. Whether the toughs really are going to get going with the going as tough as it is, will be a defining moment for the government. The window of opportunity is narrow, with two months at the outside to take and begin to implement a complex set of impactful economic moves. The opposition parties are unlikely to be supportive, particularly the PML-N as it is their policies that are now exposed as fallacious and corrosive. Sleeves are duly rolled up. To work!

Published in The Express Tribune, September 8^th, 2018.

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