Post-Election Challenges for Nawaz Sharif

by Huzaima Bukhari & Dr. Ikramul Haq

The real challenges in the post-election period is stemming from the increasing onslaught of miscreants against the State and rapidly deteriorating economic conditions having serious ramifications.

Wanton attacks on almost all political parties with loss of precious human lives confirm that the obscurantists at war with the State are openly committing treason by maintaining private armies prohibited under Article 256 of the Constitution. They are openly demonstrating disloyalty towards the State violating Article 5 which says: “Loyalty to the State is the basic duty of every citizen and obedience to the Constitution and law is the inviolable obligation of every citizen wherever he may be and of every other person for the time being within Pakistan.”

The incidents in Pakistan cannot just be called terrorism—it is much more than that. In fact, this is an open war against the State that needs to be tackled with an iron hand by the new elected government as a first priority or challenge.

Nawaz Sharif’s new government with consensus of all political parties would have to establish special war tribunals to punish miscreants guilty of violating Articles 4 and 256 with impunity.

Article 256 clearly says that “no private organization capable of functioning as a military organization shall be formed, and any such organization shall be illegal.”

Flagrant violation of Article 256 and that of Article 5 needs to be punished without any further delay.

Chapter VI of the Pakistan Penal Code, 1860 mentions inter alia, conspiracies against the State, collection of arms for the purpose of waging war (s. 122), concealing knowledge about such designs (s. 123) condemnation of the creation of the country, (s. 123A) defiling the national flag (s. 123B), assaulting president or the governors with the intention of creating hurdles in the lawful exercise of their powers (s. 124), sedition (s. 124A) and depredation on territories (s. 126)—need to be applied wherever required, adopting due process of law provided in Article 10A of Constitution.

The last Parliament, during its 5-year tenure did not show seriousness in reviewing the existing anti-terrorism laws. However, just a few days before dissolution, it passed two new laws, The Investigation for Fair Trial Act of 2013 and National Counter Terrorism Authority Act, 2013, aimed at collecting evidence and information against terrorist networks using modern techniques. In March and February 2013, the Parliament also passed the Anti-terrorism (Second Amendment) Act, 2013 and Anti-terrorism (Amendment) Act, 2013. It needs to be stressed that mere passing of laws will not help to eradicate the forces that are bent upon undermining the very existence of the State. An all-out effort on a war footing is required to uproot this menace, lest it is too late.

Clip_18 (2)The second most critical challenge is economy. In the post-election period, the country ensnared in debts, needs strict fiscal discipline, proper collection of taxes and their judicious use and above all rapid infrastructure and economic growth and development. The rising fiscal deficit and shortfall in tax revenue has assumed alarming proportions—there has been an increase of Rs. one trillion in domestic debt alone during the current fiscal year. According to the State Bank of Pakistan (SBP), our overall stock of domestic debt comprising permanent debt, floating debt, unfunded debt and foreign currency loan continues to rise—domestic debt registered a massive surge of 15 percent during first nine months (July-March) of the current fiscal year. The stock of domestic debts reached Rs 8.8 trillion mark as on March 31, 2013 as compared to Rs 7.63 trillion as on June 30, 2012, depicting an increase of Rs 1.17 trillion.

Since Pakistan received an amount of $1.8 billion from the US on account of Coalition Support Fund (CSF) so far, it has provided some cushion to reduce reliance on domestic debt resources but even then the government’s borrowing from domestic banking channel has been on the increase. Floating debt, which includes three months’ treasury bills and market treasury bills, is the key borrowing instrument for the government to meet its financial needs and over 50 percent of domestic debt has been borrowed through this instrument. Domestic debt and liabilities are likely to reach Rs. 9 trillion mark at the end of the current fiscal year. Overall floating debts reached Rs. 4.776 trillion mark at the end of March 2013 compared to Rs. 4.143 trillion in June 2012, depicting an increase of Rs. 633.2 billion. In addition, permanent debts, which include market loan, federal government bonds, income tax bonds, prize bonds, etc, rose by 15 percent or Rs. 260.6 billion during July-March of the current fiscal year. With current increase, it surged to Rs. 1.956 trillion from Rs. 1.696 trillion. Similarly, with an increase of Rs. 265 billion, unfunded debts, comprising national savings, postal life insurance and GP Fund, has reached a staggering Rs. 2.063 trillion at the end of the third quarter. Debts under foreign currency loan posted an increase of Rs. 3.1 billion to Rs 4.5 billion. It included FEBCs, FCBCs, DBCs, and special US bonds held by residents. Previously these were part of external debt liabilities but from June 2008 onwards these form part of domestic debt.

If the new government follows in the footsteps of its predecessors, our foreign debt is going to be US$75 billion in 2015 and that of domestic debt Rs. 12 trillion. They will have to take curative measures and tough decisions in the first 90 days along with overall structural reforms. The policy of appeasement towards tax evaders, money launderers and plunderers of national wealth, if not discontinued, will push the country to complete disaster. The shameless indulgence of rulers and bureaucrats in wasteful expenditure has pushed the country towards the position where half of the population of the country is facing malnutrition and one third is living below the poverty line.

The new government will have a formidable challenge on the fiscal front. The Federal Board of Revenue (FBR) is facing huge revenue shortfall. It estimates to collect Rs. 2050 billion by 30 June 2013—the provisional revenue collection stood at Rs. 1516.6 billion till 7 May 2013. The original revenue target of Rs. 2381 billion was revised downward to Rs. 2191 billion in March 2013, but FBR is not even capable of achieving it. In the remaining two months (May & June), FBR is to collect Rs. 489 billion to reach the second-time revised target of Rs. 2050 billion. This, as usual, will be done by collecting advance tax in advance, raising unlawful demands and blocking of bona fide refunds to further harming the business climate and causing hardship to the masses.

The new government can easily collect taxes of Rs. 8 trillion without levying any new taxes and further destroying the ailing economy. Pakistan certainly has 10 million individuals having taxable annual income of Rs 1.5 million (a very conservative estimate), total income tax collection from them at the prevalent tax rates comes to nearly Rs. 3750 billion. If we add income tax due from corporate bodies, other non-individual taxpayers and individuals having income between Rs. 400,000 to Rs. 1,000,000, the gross figure would be about Rs. 5000 billion. FBR collected only Rs. 716 billion as income tax in the last fiscal year. Similarly, due to rampant corruption in sales tax, federal excise and custom duties, the total collection is only 25-30 percent of actual potential. In fiscal year 2011-12, FBR collected Rs. 804.8 billion under the head sales tax, Rs 122.5 billion under federal excise duty and only Rs. 216.9 billion under custom duties. Total indirect collection of Rs 1148.2 billion was pathetically low. It should have been at least Rs. 3500 billion. If existing tax gap is bridged, the total revenue collection would be Rs. 8500 billion. There is no need to be dejected. We have tremendous potential. All we need is good governance, effective and modern tax administration and prudent use of public money. At the same time, it is necessary to ensure redistribution of income and wealth through progressive taxation—taxing the rich for the benefit of the poor. At present, we are taxing the poor for the benefit of the rich.

The new elected government can end debt-enslavement, which is the main cause of our subjugation provided that as a first step, the President, Prime Minister, ministers, parliamentarians, heads of political parties and high-ranking government officials, start living modestly, pay and collect taxes wherever due and by their behaviour, mobilise the masses for discharging their obligations diligently.

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