Economist Kaiser Bengali has issued a stark warning that Pakistan may need to seek another bailout from the International Monetary Fund (IMF) within a year if the government fails to curtail its expenditures. Bengali emphasized the need to cut expenses instead of raising taxes to solve the country’s fiscal crisis.
Highlighting the government’s repeated calls for austerity measures without substantial action, Kaiser Bengali argued that merely increasing taxes would shrink the economy rather than stabilize it. He pointed out that Pakistan’s economic capacity is already strained with burdens such as electricity costs, taxes, and high fuel prices.
Regarding taxation policies, Bengali discussed the challenges in taxing agriculture and property sectors effectively. He noted that a significant portion of farmers, especially small-scale ones, are outside the tax net, making it difficult to generate substantial revenue even if these sectors were fully taxed. He also addressed the complexities of property taxation, particularly in urban areas like Karachi and Hyderabad, where informal settlements dominate.
Bengali, who served as an advisor to the Sindh government on planning and development, criticized the federal government’s role in tax collection from provinces, labeling it as merely an agent rather than a principal player. He argued that issues like the circular debt in the energy sector are primarily the federal government’s responsibility due to flawed agreements and policies dating back to the early 2000s.
Discussing the National Finance Commission (NFC) Award, Bengali highlighted the shift in resource distribution between the federal government and provinces, underscoring that while provinces now have a larger share, the federal government’s expenses have not decreased accordingly. This imbalance, he suggested, contributes to ongoing fiscal challenges at the federal level.
In response to proposals for rolling back the 18th Constitutional Amendment or introducing reforms in taxation and expenditures, Bengali stressed the need for a comprehensive approach that addresses structural issues and enhances revenue generation without further burdening the economy.
As Pakistan grapples with economic pressures exacerbated by global and domestic factors, Bengali’s insights underscore the urgency for prudent fiscal management and strategic reforms to avoid recurring reliance on external financial support. His analysis resonates amid ongoing debates over economic policies and the country’s fiscal future.
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