Shahid Javed Burki says Pakistan can raise up to $50bn, criticizes Taxation system

By Anwar Iqbal

WASHINGTON, Oct 17: Pakistan can raise $40 billion to $50 billion from international donors to recover from the current economic crisis, says a former World Bank vice-president Shahid Javed Burki.

“There’s an appetite in the world for helping Pakistan,” he told Dawn. “What we need to do is to come up with credible programmes that can translate this interest into financial assistance.”

Mr Burki, who also is a former finance minister of Pakistan, believes that much of these $40 to $50 billion can be uploaded, with international donors providing funds for the first two or three years of a five-year programme while Pakistan matching the rest in the remaining period.

Mr Burki believes that eight to 10 donors — the US, Japan, UK, Saudi Arabia, UAE, Kuwait, possibly Germany, the World Bank and the Asian Development Bank — are eager to help Pakistan, “some for strategic reasons”.

“Both Republican and Democratic candidates in the US election describe Pakistan as the most dangerous place on earth,” said Mr Burki, and would not like to create a situation that destabilises this “dangerous place”.

Mr Burki believes that some Arab nations have “a genuine interest” in helping Pakistan and their interest in the country is not linked to its strategic location.

But “lack of confidence, absence of credible programmes for donor-funding and of a medium-term framework”, prevents this interest from translating into financial assistance.

Pakistan, he said, “needs to make a serious effort for structural adjustment and economic reforms” to encourage donors to come forward and help.

At a recent meeting, some World Bank officials, involved in talks with Pakistani officials on its effort to get the bank’s assistance for economic recovery, expressed similar views.

They said that Pakistan’s inability to raise revenues forced Pakistan to take measures that hurt the ordinary people.

They noted that the government “levy taxes on what can be taxed, not what should be taxed”, as one official said.

“Salaries are taxed. Cars are. But agriculture income is not. Real estate is not taxed as thoroughly as it should be because people are not willing to pay taxes and the government does not have the infrastructure to make them pay,” the official said.

Explaining why the country was facing a power shortage, the official said Pakistan still had the capacity to produce enough electricity to meet its requirements but was unable to do so because private electricity producers were not producing electricity.

“This is because the government is unable to pay them,” the official said.

The government, the official said, could make enough money to pay private producers by selling electricity if it could force all the consumers to pay. “But millions of consumers across Pakistan never pay their bills and the government cannot force them to pay.”

This situation, he said, forced the government to levy indirect taxes, which pinched the poor more.

The World Bank officials also strongly backed the government’s decision to withdraw subsidies on fuel, food and electricity.

Mr Burki agreed with this suggestion but he also urged the government not to borrow from the IMF.

“The IMF conditions will constrain Pakistan,” he said. “At this stage, Pakistan needs to avoid constraints. The government should have a free hand to spend on power-development, creating employment, and on other similar measures.”

Mr Burki also advised the government to start income generating programmes for the poor to neutralize the effect of ending subsidies on oil and fuel.

He urged the government not to go “door-to-door, asking for help as it hurts the country’s image.”

Instead, he said, the government should make credible programmes that encourage donors to give.

Mr Burki noted that recently, the UAE, Saudi Arabia and Qatar invested a lot of money in large agricultural programmes in Kazakhstan and other Central Asian states.

“Although Pakistan is ideally suited for such investments, it failed to attract investors,” he regretted.

Source: Daily Dawn, 18/10/2008

Leave a Reply