Six questions
Fact 1: In May 2018, the rupee-dollar parity stood at Rs115 to-a-dollar. In May 2019, the same parity had dropped down to Rs157 a dollar. That’s a devaluation of 35 percent.
Fact 2: In May 2018, our exports amounted to $2.139 billion. In May 2019, our exports went down to $2.102 billion. That’s a drop of 1.7 percent. May-over-May, our rupee has gone down by 35 percent and our exports have also gone down by 1.7 percent.
Question 1: Do we have to bring down the rupee-dollar parity to Rs200 a dollar to see any export growth?
Fact 3: In June 2018, the one-year Karachi Interbank Offered Rate (KIBOR) was at 8.53 percent. The current one-year KIBOR stands at a wholesome 13.60 percent.
Fact 4: Budget 2018-19 had allocated Rs1.6 trillion for debt servicing. The allocation for debt servicing in Budget 2019-20 has gone up to an unprecedented Rs2.9 trillion-50 percent of estimated tax revenue.
Question 2: Do we have to raise our interest rates to over 20 percent in order to achieve whatever it is that we are trying to achieve by jacking up interest rates?
Question 3: How much would the government have to allocate for debt servicing when interest rates go up even higher?
Question 4: Can our industry survive interest rates of over 20 percent?
Fact 5: Last year, our electricity tariff at 11 cents a unit was the highest in the region – India at 9 cents; China at 8.3 cents; Bangladesh at 7.3 cents and Vietnam at 7 cents.
Question 5: How much higher must our electricity tariff go before every industrial unit in this country becomes internationally uncompetitive?
Incident 1: A car mechanic told me that he used to service five to seven vehicles a day. Now, he’s lucky to get even two vehicles a day. The mechanic had five employees of which he has already laid off three. The mechanic shop next door was shut down because the mechanic could no longer pay the monthly rent.
Incident 2: A majority of individual shopkeepers inside large shopping malls in Lahore have not been able to pay their rents for the past few months. Intriguingly, the owners of large malls are still letting these shopkeepers stay.
Incident 3: A distant relative of mine who has been running a pipe factory for the past thirty years just shut down letting go 500 employees. The factory owner claims that the ‘tax raiders’ forced him into shutting down.
Economics 101: Tax is a consequence of economic activity. Kill economic activity and you will be left with no taxes. Is that too complex to understand? Focus on economic growth – not on taxes.
Fact 6: Our government’s current expenditures have gone up from a mere Rs1.5 trillion in 2008 to a colossal Rs7.2 trillion in a mere 10 years.
Question 6: Can you name any other country whose current expenditures have gone up by nearly 500 percent in just 10 years?
Mother of all facts: Pakistanis are not ‘tax thieves’. Most Pakistanis are being taxed to the maximum. Pakistanis fill the country’s treasury every year; their leaders empty it out every year. Our government’s problem is ‘excessive spending, not inadequate taxing’. Please don’t kill the economy in the name of ‘more taxes’.
The writer is a columnist based in Islamabad.
https://www.thenews.com.pk/print/491457-six-questions
