Austerity Drive

BMWs, in multiples, exempt from tax. The FBR in one pocket and the national treasury in the other. Who wouldn’t want to be the PM of Pakistan? Finance Minister Ishaq Dar has to be given credit for this one. In a move of financial genius, he has used the austerity policy to exempt the two BMWs purchased for the PM from customs and sales tax. And we can thank him for this, the tax exemption saved the taxpayer a large chunk of the Rs 224 million that the cars cost, but there’s still millions that will go out of our pockets. Of the BMW’s in question, only 15 exist. Not only are they rare but they guzzle diesel like thirsty elephants. Even President Obama’s limousine cost less than these cars.
Not only is the government irresponsible with its own spending, the existing austerity measure may not even be a long-term solution. Under the pressure of the IMF, and its own fiscal mismanagement, Pakistan has been on an austerity drive for many years. In the beginning of May, the IMF conducted its third review of the $6.6 billion Extended Fund Facility (EFF), a bailout approved in September 2013, mostly to be invested in the energy sector. Pakistan had met two of three structural benchmarks. These were the increases in Taxation and the audit of the National Electric Power Regulatory Authority (NEPRA). Pakistan has an inflation rate of 9.2 per cent and the IMF wants more reductions encouraging contractionary fiscal and monetary policy. The economy has a high fiscal deficit and a low tax-to-GDP ratio of 8.5%. With such numbers, it hardly makes sense for the government to spend so lavishly and gather unrecoverable sunk costs. Local production and its domestic demand is missing targets, there is a huge gap between savings and investment and imports and exports. The economy is relying on foreign inflows to finance the budget and balance of payments deficits. In the long run this increases the debt burden. If foreign borrowing, grants and privatisation proceeds are left out of the equation, the State Bank would hardly have any foreign reserves.
For the PM to have such disconnect with the state of the economy and the sentiment of the masses is inexcusable. The PML(N) made the decrease on reliance on foreign loans a rallying cry in the elections criticising the PPP. We are a nation plagued by more-of-the-same, no matter who’s in charge. In a country that can so easily create laws that allow child marriage and blatant polygamy, how hard can it be to have a law that constricts such spending of government officials?

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