Imran Khan again filled the Parade Ground Islamabad successfully against the rising inflation on a two-day notice.
The recent protest was called after an alarming increase in petrol and diesel prices. In two months, we have witnessed the massive PKR 84 per liter increase in petroleum products, taking them to record levels.
It can have a multi-layer effect as in Pakistan, the price of petroleum products determines almost everything.
Pakistan’s shackled economy is exposed to consistent inflation hikes. A 29% sharp increase in the oil price has stunned the whole nation. During Imran Khan’s tenure as the Prime Minister, Pakistan was applauded for its covid management globally. Pakistan’s potential was recognized as a promising emerging market. Sadly, the new regime has transformed the face of Pakistan’s economy.
It’s hard to believe, but Pakistan is now on the verge of bankruptcy.
Before that, the government imposed an upto 10% supertax on 13 large-scale manufacturers, including oil, textile, fertilizer, automobile, steel, sugar, etc., to counter inflation and revive the dwindling economy.
Initially, it was claimed that it was a one-time tax, which was proven wrong later and will be applied yearly. The plan is to put pressure on the industries which bagged lucid profits in the past two years. Instead, it will suppress the middle class and squeeze the economy further. After the announcement, Pakistan’s stock exchange crashed, showing the industrialist’s concern regarding economic uncertainty.
Musadik Malik, Minister of State (Petroleum Division), hinted at an expected gas shortage and tariff hike in the near future, which can complicate things further for industrialists and LMS.
Imposing supertax on the profitable industries kills the fundamental reason behind regime change. The power change was maneuvered to fix the derailing economy, inflation, economic challenges, and collapses. During the previous government, the growth rate of the industrial sector was 7.81%, and the large-scale manufacturers touched 10.4% from July 2021 to March 2022. LMS paid 87% more dividends to the shareholder in 2021, reflecting the economy’s potential during Imran Khan’s tenure. Indeed, it was a progressing economy with potential, distracted by disaster for unknown reasons.
Initially, it was a tough ride for Imran Khan’s government. Inflation hikes and strained economic conditions repeatedly challenged the government, resulting in criticism and resentment among people. The IMF tabled an offer that made the situation more alarming. With the IMF, the government is seeking loans from Chinese commercial banks.
Its prerequisites, terms, and conditions are not declared, which is a matter of concern.
Still, Under Imran Khan’s leadership, the GDP growth in 2022 reached 6%, with a steady increase in the per-capita income, which reached $1,798.
The government offered subsidiaries and rebates to the public to utilize the available disposable income and generate economic activities. The macro indicators were slowly getting aligned with micro indicators.
Like Russia, new markets were explored for energy and wheat purchases to mellow down the effect of international energy prices. Imran Khan aimed to mobilize the economy, increasing per capita income, which would have impacted the tax collection and economic activity generation. Though criticized a lot, it was a government with a proper plan and a dedicated team to execute it.
The allied government promised a more powerful and quick solution to the problem but failed. Imran Khan’s narrative for the US-forced regime change has penetrated well in public. Therefore, the new government lacks the legitimacy and support of the people. Having no other alternative, their primary focus is securing the IMF at any cost, even if it leads to crippling Pakistan’s economy.
The oil subsidiary given by the Imran Khan government was removed, which resulted in a 29% increase in oil prices within 20 days. Finance Minister Miftah Ismail accused the Imran Khan government of sticking to the worst deal with the IMF, leaving the current regime with no choice. If so, what was the need to remove the Imran Khan government and get into hard water with no solution? Why was PTI’s political death averted with last-minute life support?
Seeming these questions have no answer. The economic stability the Imran Khan government gradually achieved was the biggest threat to his opponents. The Micro-Macro indicator’s alignment would have ensured Imran Khan’s sustainable future in power, which could have ended the orthodox and conventional political setup in Pakistan.
His uncompromising commitment to eliminating corruption threatened the main political stakeholders. It was critical to stop him and his quest for a prosperous country.
Expanding the tax net is the only sustainable solution to Pakistan’s economic problems. During Imran Khan’s rule, more focus was made on using tools, including Amnesty schemes and tax provisions.
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During Imran Khan’s time, the tax collection bypassed the never achieved before, seemingly impossible target of Rs5.35 trillion in taxes in 2021-2022. Imran Khan mobilized the 70% black economy outside the tax net. The PTI’s government expanded the tax net by approximately 29%. Now the IMF has given the target of Rs7.2 trillion for the fiscal year 2022-23, which seems unlikely as the sitting government lacks legitimacy and people’s trust. The rising inflation and unfavorable policies are making the situation complex.
Implementing the super tax will only put pressure on the taxpayers, making it more covenant for the other 70% to stay out of the tax net. It will cap the economy to 40% leading to a dead end.
More price increase shocks are predicted soon. Limiting economic activities is also considered an option.
Dedicated efforts are made to align corruption with livelihood. People are left at the mercy of the IMF with no effort to shoulder their burden. Alarmingly the government is willing to compromise to a dangerous level. Indeed we are living through the chaos and paying the price of seeking change and a prosperous corruption-free Pakistan.