Economy is now every­thing in Pakistan, which has reached a staff-lev­el agreement with the Inter­national Monetary Fund (IMF) for the final and third tranche amount­ing to $1.1 billion to conclude the Stand-By Arrangement of $3 billion. On the prob­able approval of the agreement by the IMF’s Executive Board, Pakistan keeps its fingers crossed.

This is called respite – the post­ponement of the threat of sover­eign default on external debts. However, this is not a solution. Pakistan has to undertake struc­tural reforms: first, to reduce the budget deficit and, second, to re­duce the trade deficit. Regard­ing the budget deficit, one-half of the solution is to increase reve­nue by broadening the tax base. Pakistan is devising policies to broaden the tax net to include exempted or sub-taxed sectors such as retailers, wholesalers, agriculturists, etc. However, Pak­istan is overlooking the other half of the solution. That is, to de­crease expenditure. Pakistan is not devising any policy (to make it public) to reduce non-develop­ment expenditure. This is how Pakistan’s approach is lopsid­ed. The lopsidedness is bound to take centre stage when the range of the tax net is broadened and when the rate of tax is augment­ed. Lavish and unchecked spend­ing by government functionaries may not convince people to pay taxes. Similarly, the royal life­style of the ruling elite may not persuade people to contribute.........

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