Published Date: Mar 12, 2015
Govt. seeking research help in framing national economic policy: Dastgir
Multiple inequalities persist across the country impeding long-term growth potential and weakening the fight against poverty, says a study jointly launched by Oxfam, Pakistan, and Sustainable Development Policy Institute (SDPI) here. The study launched ahead of the federal budget 2015-16, has called upon the government to address the problems of 50 million poor people across the country, who want to come out of the poverty cycle. Speaking on the occasion, Federal Minister for Commerce Engineer Khurram Dastagir Khan said the government is trying to pursue evidence based research in framing national economic policy but the dilemma is that most of us are not fully aware of our economy.
Highlighting the gaps in media on under-reporting of important national issue especially the economic ones, he said: “We don’t have markets that come under the definition of economic market, instead, we have large bazars in which each day billions of rupees are transacted on a simple white paper without taxing.” Ultimately the government has to increase direct taxes, as there is no framework to regulate the bazar economy, he added. Talking about inflation, the minister said inflation is under control now and it is just over 3% — the lowest in 15 years.
Dr Abid Suleri, the Executive Director of SDPI, said that sustainable development is impossible without social justice. Lamenting that currently there are the only opportunities where the rich get richer and the poor get poorer, he said that social justice cannot prevail without bridging the gap between the ‘haves’ and the ‘have-nots’. He also said that social justice should be provided to all without any impartiality. He also insisted that the economy should be structured in a way which ensures that the big fish are captured in the tax net to stop unchecked wealth accumulation.
Arif Jabbar Khan, the Country Director of Oxfam, said: “Pakistan is now at a crossroads and it could continue with the historical baggage of existing policies and risk political, economic, social, and environmental sustainability or it could make a turnaround by addressing multiple inequalities more seriously in all aspects to achieve economic progress and share benefits”. Conducted by Dr Abid Burki, Dr. Rashid Memon, and Dr Khalid Mirof Lahore University of Management Sciences (LUMS), the study points out the causes of inequality as the lack of opportunities to access health care and education, unequal distribution of land and capital and unjust policies, including unfair taxation, low spending on social protection and services.
The study highlights that the consumption share of the richest 20 per cent population was more than five times the share of poorest 20 per cent population during the year 2011–12. Similarly, spending share of top 10% of population was 31 per cent while 40 per cent poor population’s spending share was only 20 per cent during the same period, which means that 18 million richest people spend one and a half times more than 72 million poor people.
“In terms of intra-province inequality, Sindh is the most unequal province in Pakistan with highest Gini index, which means the divide between the rich and the poor in Sindh has widened followed by the Punjab while Khyber Pakhtunkhwa (KP) and Baluchistan provinces have the lowest levels of inequality. The level of urban inequality is considerably higher than rural inequality, which indicates that urban prosperity is not equally shared.” The study reveals that due to tax exemptions, Pakistan loses Rs 500 billion annually, which is 1.5 times the annual budget for education. It further says that Pakistan can get additional tax revenue of Rs 80-115 billion if the exemptions on agriculture are withdrawn. “Lack of tax revenues puts pressure on the budget and leads to inflationary monetary policies that have an important impact on the distribution of real income of poor. Low tax base also implies that there is little room for investments in nutrition, public education and health.”
Between1996–2002, few companies received 45 per cent larger loans than other companies. These firms had a 50 per cent higher default rate on loans as well, the study mentions and pinpoints that the defaulted loans were inefficiently invested, leading to a further loss of an estimated 1.6 per cent of GDP per year, that is a total of Rs.67bn. The study recommends that a policy of ‘geographical targeting’ should be adopted in which development funds may be allocated to least developed areas on the basis of district-wise poverty mapping. It further recommends that consumption taxes should be made less regressive, food and related items, particularly used by lower income groups should be made tax-free. Redistribution of assets may reduce inequalities and enhance growth.
There is also a need to consider land transfers. Effective policies for female ownership of property, access to work and educational opportunities has to be formed, resourced and implemented. Dr Abid Aman Burki said that the issue of inflation and poverty is under reported in Pakistan by the government survey like Gini coefficient. According to him, the government estimates tells that Gini coefficient for Pakistan is just 0.3, but in reality the figure is great example of under estimation. He criticized the government for deciding where to invest for development? “If it relies on such biased and under reported data, then there is a serious question on the part of the government. Dr Rashid Memon said that inequality and taxation has direct and critical link. “60% of revenues come from indirect taxes. Overtime, ratio of direct and indirect taxes is consistent.” There seems to be a political consensus to sustain this ratio he said, adding that similarly, there is no taxation on agriculture where we can earn 80-115 billion rupees annually.”