Quick and dirty fix
ONE of the most difficult decisions to make for a man is to tell his family that it is becoming difficult for him to put food on the table. The political circus doesn’t concern him, what concerns him is the next medical bill. These realities can only be observed when you have boots on the ground; you can’t notice them from the tinted windows of a vehicle racing between a VIP protocol.
On one hand, we have people standing in long queues to collect meal boxes from an NGO van or eating at roadside dastarkhwan. On the other hand, a social class was willing to wait in long queues outside a coffee shop in Lahore. This is what happens when you have a high-income disparity.
I mentioned in my last article that we are going through stagflation which means high unemployment, high inflation and no significant growth. Usually, when the government wants to control inflation, they make borrowing expensive and restrict the supply of money. To address unemployment, the government needs opposite policies. You can’t control one without making the other worse. This explains the sensitivity of our condition.
Every new economic episode in our country comes with new indirect taxes. Bearing this burden a labourer is now unable to pay for his commute from home to the factory if we wish to meet his expenses. Putting further burden via indirect taxes makes no sense and is inhumane. Instead, we could have made some efforts to document the undocumented economy.
According to estimates, Pakistan has an undocumented economy equal to 35.6% of the GDP, around $661 billion, others believe it is between 40%-50%. Our markets rely heavily on cash settlements, therefore, they are not taxed or documented. Some factors like corruption, poor governance and lack of trust in the government are common among all the nations that have a high undocumented economy. Naturally, people don’t trust that their tax money will be used to improve their standard of living. On the contrary, these people happily contribute to charity. Some don’t want to be taxed and know that they can flourish undocumented. That comes under poor governance and corruption.
Since we don’t believe in implementing solutions, our modus operandi is implementing quick and dirty improvisations. We halted issuing new letters of credit (L/C) and also payments on sight or against D/P (Document against payment). This resulted in goods being stuck at the port, so the focus shifted to working on D/A (Document against acceptance). This means that you can release your goods today against a promise to pay later. These maturity dates are crucial to meet, otherwise, you risk ruining the reputation of the importer, the bank, and the country.
We will need more dollars in the next six months when all these payments will be maturing and we will have to make debt repayment as well. Therefore, we will need another IMF program and that will bring even more financial difficulties for the already impoverished social class.
This crisis is the outcome of years of mismanagement, returning vehicles may be a positive gesture in the name of austerity but the plethora of committees and cabinet members’ performance is what we need. The people they are asking to sacrifice more, aren’t children of a lesser god.