On March 1 (2022), EAG Pakistan twitter handle @eagpakistan posted 6 tweets reacting to the incumbent regime’s “relief measures for the people.”
Here are the tweets:
PM’s decision to provide benefits of various sorts–lower fuel & elec prices & subsidized loans & tax exemptions for selected sectors–continues long & inglorious tradition of country’s top leadership enacting policies erratically in defiance of the most basic econ principles1/3
The benefits announced will be celebrated briefly as “relief” but will further deteriorate Pakistan’s financial health, because they create a burden that its decrepit tax machinery cannot shoulder through prudent revenue collection elsewhere. 2/4
For efficient economic system, it is essential prices be linked directly to costs. When underlying costs rise, as they do when int commodity prices increase the govt cannot insulate populace from higher dom prices without creating a higher debt burden for future generations. 3/5
Insufficient tax collection from broad swathes of economy & lack of productivity relative to other countries are at the core of our economy’s ailments. Either because of lack of understanding amongst the top leadership or an unwillingness to start politically painful reforms 4/5
the current government differs not a bit from its predecessors in setting ad-hoc and wrong-headed economic policies that are sinking the country further economically. 5/5
Comment taken from The Atlantic Council -Dr Ali Hasanain is the Head of the Economics Department at the Lahore University of Management Sciences (LUMS) and a non-resident senior fellow at the Atlantic Council’s South Asia Center
I responded to these tweets thus:
Hasn’t the EAG jumped into the fray at the wrong moment (by quoting the opinion of an economist)?
I.e. when the Ashrafist mess is becoming messier.
(The wrong moment means instead of asking for minimizing the taxes on fuels, at the same time, EAG grumbled against the “relief” only.)
Shouldn’t the EAG take a principled stand re fuel & electricity & gas prices, subsidized loans & tax exemptions, etc?
I.e. how to clear the mess.
EAG should plead for allowing the market to determine the prices, etc.
No subsidies, no tax exemptions, etc.
Less and less gov footprint.
Lower taxes. Such as on fuel, a 5%.
And while eliminating gov footprint, gradually withdrawing subsidies for the low-income citizens, etc.
I.e. while adopting the cost-linked-prices policy, it be demanded that taxes be minimized, gov size be reduced, import-export be freed, borders be opened, open-skies policy be adopted.
I.e. restructure the economy based on the principles of market philosophy.
Website of the EAG: https://eag.org.pk/