WHO knows what a failed state is? Such definitions are for the academics and experts. But what one can easily ascertain is a state that is dysfunctional.
For what would you call a state that has neither the power to generate resources and tax those who need to be taxed, nor the system or even the need to ensure that it accounts for what it spends? It can keep piling up a huge deficit without question and have nothing to show for it.
What would you call a state that cannot deliver the very least: the safety of life and limb to its citizens? Where if you particularly happened to be in the smaller provinces the only thing you could get by on is your faith. Yes, God remains the only recourse.
In case you missed it, the sign said Caution: steep slope ahead. Next to the sign there was a small picture of a sharp downward slope. It was placed there to warn travelers on this road that they should brace themselves for a steep descent that could test the traction on their tires.
The steep slope ahead is the decline in our foreign exchange reserves that have, in the first quarter of the fiscal year, dropped by more than what our financial managers had bargained for. With our old friend, the current account deficit, back in our lives again and that fair weather mistress — foreign inflows — having reliably and predictably abandoned us one more time, the drop in our reserves should become a serious worry.
Last week, I had expressed hope that in the coming days we would make the hard decisions needed to prevent our country from sliding into anarchy and chaos. We would not then remain the country to which Muammar Qaddafi would point as an example of what could happen to Libya if his dictatorial regime was brought to an end.
Developments during the past week have not, to say the least, been encouraging. First we had the budget, in which no genuine effort seems to have been made to raise the tax base or to address impediments — energy shortages among others — and yet we have concluded that our deficit will remain under control and that growth will have an upward trajectory. Are we going to continue to go down the path of foreign aid dependency and have a government ‘of the elite by the elite and for the elite’ that taxes the poor and the now dwindling middle class mercilessly to nourish the ‘fat cats’ in the ranks of the bureaucracy and the political establishment? Can we not levy direct taxes that would bring the tax-to-GDP ratio to at least 15 per cent? Can we not spend more on education and health? Can we not stop treating the defence budget as beyond question? …
Vice President Joe Biden is the latest high level U.S dignitary to visit Pakistan. As the series of such high profile visits continues, one wonders what actually transpires in such meetings and what kind of assurances are given from both sides to each other. In this episode of Reporter, Arshad Sharif tries to find out what PM Gilani meant when he said that he has given assurances to Joe Biden that practical steps will be taken to resolve all the difficult problems.
Courtesy: Dawn News (program Reporter with Arshad Sharif)
Finance Minister Hafeez Sheikh’s warning to officials of the state, delivered in a sombre meeting late last month, could not be clearer: the government, federal and provincial, is on the verge of financial collapse. So dire is the state of affairs that the government may not have money to pay salaries in a few months. Lest this be dismissed as hyperbole, Mr Sheikh’s comments have been echoed privately by many economists and experts familiar with state finances in recent weeks. In fact, if anything the finance minister’s comments are on the more optimistic side of dire.
The basic problem is clear: the Pakistani state, all tiers of government, spends twice as much as revenue generated, while neither is expenditure being curtailed nor are revenues being meaningfully increased. At the level of the citizenry, the immediate impact is felt in the form of rising inflation (sustained budget deficits of the kind Pakistan has had over the last few years are highly inflationary in nature) while in the long term it will be felt in terms of debt servicing crowding out investments in development and infrastructure.