Balanced economy — tax and non-tax revenue

Global economic and financial institutions such as the IMF, World Bank, Paris Club, etc. succeeded in trapping Pakistan in a debt trap. They are about to weave a political trap to squeeze Pakistan and the State Bank of Pakistan Autonomy Bill is the first concrete step. The process will not stop there, it will continue and privatization will be the next policy. Development challenges, food insecurity, poverty, unemployment and health further aggravate the situation. Regional security challenges and global power plays have introduced elements of uncertainty. The sudden emergence of nationalism, unilateralism and country first politics has changed the whole global dynamic.

Thus, it can be inferred that Pakistan is going through an era full of challenges, insecurities, economic difficulties and uncertain global dynamics.

Under these circumstances, Pakistan is trying to find a viable solution to its problems. Such a solution can help Pakistan meet its internal challenges without compromising dignity on the world stage. National Security Policy 2022 has attempted to recognize the challenges and present some ideas for discussion. It is not enough. Pakistan needs a more comprehensive and dynamic policy. A policy that can help solve current challenges and meet future needs.

First of all, Pakistan must pursue paths of economic and social development by adhering to a sound policy framework and approaches. It should not follow political rhetoric or fanciful slogans. It must be anchored on solid foundations. Under the current circumstances, Pakistan should look for sectors that can provide immediate relief, push for economic recovery and act as a building block for long-term sustainable growth and development. The analysis indicates that the agricultural sector has all the ingredients to revive the economy for sustainable growth and give relief to socio-economic development. This is not a self-made assumption, but based on fact, as we know it plays a multi-faceted role in our economy. It contributes to export through the textile sector. It helps control widespread food insecurity. It creates massive jobs for unskilled labor, which helps to tackle poverty issues.

To capitalize on the potential of agriculture, the government will need to adopt a double-edged sword policy and action plan. On the one hand, Pakistan should use agriculture to accelerate growth. On the other hand, the development needs of the country must be met through policy interventions (for more details, Shakeel Ramay’s paper on the double edged sword can be consulted).

Second, for long-term sustainable growth and development, the government will need to focus on industrialization, science and technology, and quality human capital. For industrial development, international cooperation is necessary as Pakistan does not have a strong industrial base or internationally significant brands. The other side of the coin is that Pakistan does not have sufficient financial resources to sustain the industrialization process. However, industrial development policy must be designed based on the realities on the ground, indigenous wisdom, peoples’ aspirations and Islamic values.

The most important intervention should be to create a balance between non-tax and tax revenue during the industrialization process. A wise and smart policy framework can turn SOEs into a good source of non-tax revenue. SOEs still provide essential resources to support the national economy and development if they are governed by economic logics. For example, in 2021, Chinese state-owned enterprises contributed almost 32% of the national GDP ($5.72 trillion). Additionally, 91 Chinese SOEs are among the Fortune 500 companies. Pakistan can benefit from China’s experience in running SOEs profitably.

Industrial cooperation under CPEC provides an excellent opportunity to learn from China in promoting balanced industrial development in Pakistan. Having CPEC, China can also serve as an anchor country/market for Pakistan. Many experts believe that to keep pace with growth and development, the country must be an anchor country. In the case of Malaysia, Japan served as the anchor country and for Turkey it was the EU.

Third, Pakistan would need quality human capital to achieve the goal of sustainable development. At present, Pakistan’s ranking is very low and it stands at 134th place. It is therefore necessary to invest resources and efforts to improve the situation.

First, Pakistan will need to review its educational policy and practices. The allocation of budget and other resources should follow the principle of “investment in education” and not “education spending”. Unfortunately, an education expenditure policy is being adopted in Pakistan.

Second, there is a need to refine the health system and shift the emphasis from medicine to a nutrition-based health system. Mother and child must be a priority area and the government must strive to ensure nutrition-based health standards.

Thirdly, Pakistan must work on its own economic model in the light of Islamic principle according to the dream of the Father of the Nation. He said at the opening of the State Bank of Pakistan, “We must work out our destiny in our own way and present to the world an economic system based on a true Islamic concept of equality of manhood and social justice. We will thus fulfill our mission as Muslims and give humanity the message of peace which alone can save and ensure the well-being, happiness and prosperity of humanity”. He never liked the liberal economic order. He considered it one of the most unequal economic systems. He thought it would not bring prosperity and equality among humans.

To achieve the above goals, Pakistan will have to learn the art of fishing, as success depends on continuous hard work. Pakistan needs to get out of a dependency mentality on aid and grants. This mentality will not help Pakistan grow but will keep Pakistan on its knees and hurt the dignity of the nation. We must recognize that dignity can only be earned and maintained through hard work. There is no shortcut to dignity.

Sallie R. Loera