SAM Daily Times

"IDOLIZING FAILURE"

Pakistan has miserably failed in maintaining the balance between Revenue and Expenditure which resulted into a draconian crisis. Consequently fiscal crisis and deficit has emerged as the most serious problems of MACRO ECONOMIC MANAGEMENT in Pakistan. Pakistan witnessed major structural imbalances in public finance since 1970. Over these years, the budget deficit averaged over 7% of GDP. Tax to GDP ratio averaged around 14% in pounds. It ought to have been around 20 %. Two major factors threaten our very existence : DEBT and TAX system failure. Think and imagine and understand that debt servicing is 45% of budget outlay.


Consider and research, if you can, then evaluate

(a) The use of money raised by debt
(b) The alternative displaces

Debt induces inflationary tendencies which triggers a price spiral which in turn cause cost-push inflationary pressures.

Our foreign debt has shot up to Stratoshpere - $59.5 billion
and our internal debt $60billion
So are we solvent?

Many variables brought us to the precipice. We now stare into a black hole. With America sinking from recession into a mild depression, and the World battling the concept of new Financial Architecture , we are in for some many complex times. To say the least
In Contingency planning or even a worst case scenario planning we should come to grips with a 4 headed dragon!

1. NARROW TAX BASE
2. INEFFICIENCY IN TAX administration
3. Imbalance towards indirect TAXES
4. Low elasticity of TAX system.