In the month since the US and Israel launched strikes targeting Iran, an increasing fallout on the economic front with global ramifications has hit countries hard, including Pakistan.
The latest hit to Pakistani consumers came just this week, with a sharp rise in the domestic price of high-octane fuel used in luxury cars. This was apparently to force the relatively rich to bear a higher cost of the national burden that now overwhelms oil-importing countries worldwide.
Yet this latest measure shows once again that the government relies more on tokenism than substantive action. Across Pakistan, many areas require immediate action to address the mounting economic challenge posed by the Iran war.
For a long time, Pakistan has remained a country where the relatively few well-endowed elites have remained immune from sharing the national burden. It is hardly surprising that only about three percent of Pakistan’s population of 250 million are registered as tax filers, with even fewer contributing to the cause in any meaningful way.
Meanwhile, a history of aggrandizing the rich and powerful only reinforces a tragic trend: in everyday life, Pakistan remains a country where privilege is showered on the privileged few. This history is well illustrated by examples of the ruling elite over time who go to prized overseas destinations for medical treatment, while treatments of similar quality are available in Pakistan.
In another relevant example, the government of Pakistan provides institutions of higher education, including many that remain neglected and in disrepair. Pakistan’s education system has visibly deteriorated over time as the country’s elite have ignored this area while sending their own children to high-profile educational destinations worldwide. Similar examples exist across sectors, reinforcing the powerful reality that Pakistan’s well-endowed elite remain virtually aloof from the rest of the country.
As the future of the war against Iran remains impossible to predict, Pakistan’s ruling structure must resolutely prepare for the worst. Although Pakistan remains afloat today, aided by an IMF loan, it is important to remember that Pakistan returned from the brink of default on its foreign debt just a few years ago.
Although Pakistan today remains solvent with IMF support, this cannot at best be the solution to a deeper challenge. In short, Pakistan needs to rebuild confidence in its future, remain independently solvent through a significant improvement in its balance of payments, and last but not least, raise the prospects for future economic growth.
For now, Pakistan remains trapped in a low-growth cycle that at best matches the country’s annual population growth. In other words, the size of Pakistan’s economic pie is growing annually by the same margin as the growth of its population. Arguably, this can be seen as a cycle of no growth or marginal growth.
Going forward, Pakistan must implement three interrelated reforms to prepare for the future. First, amid the mounting global fallout from the war on Iran, it is important to force Pakistan’s elite to tighten their belts like never before. For example, the luxuries previously showered on elected representatives must be suspended immediately for Pakistan to enforce spending cuts that are long overdue.
Also, high net worth individuals across the country must be forced to meet their genuine tax obligations instead of just contributing token amounts. In recent years, other classes, such as visibly wealthy traders, have successfully resisted budgetary measures to contribute more to the national tax collection.
As Pakistan faces one of the toughest moments in its history, no one can be allowed to avoid their tax obligations. This is important to avoid placing a future burden across the board, particularly through further reliance on indirect taxes.
Second, as Pakistan faces a formidable war-related challenge, it also faces another major challenge that must not be ignored. The stark reality of climate change and its subsequent devastation was seen across Pakistan just last year, when unexpectedly heavy rainfall caused widespread destruction and human displacement across the country.
Even ahead of this year’s expected rainfall cycle, Pakistan officials have already warned of an upcoming period that could exceed last year’s period by at least 20 percent. This requires the country to redouble its efforts for a new focus on the agriculture and forestry sectors as it responds to the dire consequences of climate change.
Beyond the climate-related challenge, targeting agriculture may be the fastest way to revive economic growth while addressing the growing food insecurity of recent years.
Finally, Pakistanis are known to be generous donors to causes in their own country. But harnessing this spirit for a greater cause requires immediate action to intensify the work of the non-profit sector across Pakistan.
Together, the path to change must be embraced immediately as Pakistan tackles the fallout from a formidable global challenge.
The author is an Islamabad-based journalist who writes on political and economic affairs. He can be found at: [email protected]
Disclaimer: The views expressed in this piece are the author’s own and do not necessarily reflect Pakinomist.tv’s editorial policy.
Originally published in The News
