Editorial

The python’s power

An IMF review mission has expressed displeasure over lack of momentum in imposing new taxes and reforming power sector

Editorial November 02, 2010

We always knew the accord reached with the IMF in 2008 was going to result in some tough policies. Just how harsh they would be is now becoming clear. An IMF review mission visiting Islamabad has expressed displeasure over the lack of forward momentum in imposing new taxes and in reforming the power sector. For the IMF, ‘reform’ essentially means the removal of subsidies and a 35 per cent hike in power tariffs on the cards by the end of the fiscal year. We can all envisage what lies ahead for citizens.

Conforming to political – and practical – necessity the government has decided that power will be raised in increments, at about two per cent a month. Like the unrelenting squeeze of a python that has trapped its prey, the torture is to be a slow one, as consumers feel the continuous pinch of inflation. The report of the power increase comes at a time when petrol prices have already soared and inflation of the costs of other items continue. It should be noted that over the last year, there has already been a hike of about 60 per cent in the cost of power. Many consumers turn pale as bills land at doorsteps, bringing with them monetary demands almost impossible to meet.

The government has, each time, portrayed itself as helpless — telling us that in the matter of power it has no choice but to go along with the IMF. This may be true. But there should also be some thought as to how citizens are to manage. Will they eat less? Remove children from school? Deny ailing family members healthcare? The choices for them are limited. The middle-class struggle most days to somehow make ends meet; the option of begging or even borrowing from relatives is not always available to them. The trap we have dug for ourselves is a deep one. The government could risk tumbling in itself, unless it can find a way to ease the pressure of the noose that tightens around people’s necks and could, in time, ensnare it as well.

Published in The Express Tribune, November 3^rd, 2010.

COMMENTS (4)

Arsalan J. Sheikh | 13 years ago | Reply This is the worst kind of yellow-journalism. I am amazed to read this kind of alarmist and sensationalist reporting. The author is obviously ignorant of the basics of economics. Subsidies of any sort, anywhere in the world, always produce shortages. It is one of the very simple iron laws of economics. Whenever a product is subsidized, demand will rise, and supply will decrease, resulting in shortages. We subsidize gas, we have gas shortages. We subsidize electricity, we have electricity shortages. In Ramazan, we try to subsidize wheat and sugar, and surprise surprise, there are shortages of wheat and sugar every Ramazan. We do not have enough exports as a nation to afford these subsidies, so we keep borrowing from international agencies. This drives our country further into debt. What kind of nation ties the chain of debt and interest to its children, just so we can burn fuel today? Spending borrowed money on education, infrastructure, and establishing new industries makes sense, as these will generate future revenues and taxes. But to spend borrowed money on burning fuel is a criminal waste of our resources, and a criminal burden to place on our future generations. And please PLEASE don't try and make cheap points by sympathizing with the poor. These statements may sound nobel, but they are simply unrepresentative of reality. "Will they eat less? Remove children from school? Deny ailing family members healthcare?" ... or this one: "Many consumers turn pale as bills land at doorsteps". I know several poor families. None of them turn pale. They either make do, or they steal connections for gas and electricity. When is the last time you seriously saw someone turn pale? While the floods have taken a toll, if we remove that one-time disaster, and look at some solid numbers, FACTS, then the picture is very different. Literacy rates across Pakistan (all provinces) have been rising year-on-year for the past 10 years. People have been shifting UP the socio-economic ladder, not down, as the author would have us believe. If the author had even BOTHERED to read our national surveys, he would know this. But you don't have to look at pesky annoying numbers to see that poorer Pakistanis are better off, just look around you. It is harder and harder to find idle work-men like laborers, carpenters, brick-layers, plumbers, and electricians. When you do find them, their rates have gone up over the last few years. It is harder today to find and keep domestic help than it was 10 years ago. More and more poor people have mobile phones. Pakistan's teledensity is over 60%, whereas it is 47% in India. Do you REALLY think the number of mobile phones amongst poorer Pakistanis is going up despite the fact that people are going hungry and pulling their kids out of school because their electricity bills are eating up all their money? Come ON!!

Zahid Hussain | 13 years ago | Reply It appears that Pakistan is represented by highly educated illiterates in meetings with IMF. They evidently appear to be dumb, deaf and headless robots programmed to respond to every IMF dictation only in one word: YES. Finance Minister and Petroleum Minister both deserve to be sacked with immediate effect. Prime Minister is not required to tell the House that he will not dissolve the assembly, he must announce the termination of the two ministers and see how the house responds and entire cabinet behaves in future. These two ministers understand only one meaning of taxation: Put more burden on already over-burdened poor direct and indirect tax payers. They fail to understand that the way to generate funds is not through inhuman taxation but by willing participation of business houses and motivated and convinced people. Corporate tax needs to be conditionally eliminated altogether. The ownership of social sector development can be transferred to business houses to build, operate, recover the investment with reasonable profit and by genuinely empowering and strengthening the transparent regulatory institutions. Can we expect that from ministers like Raja Pervez Ashraf and Hafeez Shaikh who have repeatedly proved that they do not have heads on their shoulders?

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