The International Moneta-ry Fund has advised Pakistan to formulate development plans excluding financing from external loans.

The advice is not binding as Pakistan is no longer a beneficiary of its financial support. But the other loan givers like the World Bank and the Asian Development Bank do take the Fund’s advice into account when providing loans.

Simultaneously, the major powers have assured Pakistan of economic assistance in view of the tremendous economic and other difficulties it faces.

The two statements do not contradict each other. In the past, the international financial institutions (IFIs) have advised Pakistan to formulate a development policy not heavily dependent on external resources and depend more on domestic savings and investment. Such advice is repeated from time to time, more so when external support becomes difficult to obtain or too costly or tied to political conditionalities.

After over 50 years of foreign aid, Pakistan has to formulate a development plan that can be funded mainly by its own resources.

Such plans have to be realistic and take into account the real needs of the people in a country with a population of a hundred and sixty million, particularly the low income groups. It has to provide jobs to newcomers, and particularly take care of the educated and the technically qualified so that there is no waste of talent and the educated are not frustrated.

The increase in production in the farms and factories should meet the needs of all the people at a fair price and the government should not let one group profit at the cost of another. The situation which obtains in the sugar or the wheat markets should controlled and there should be enough for exports , particularly farm based exports.

Of course, all this is not possible without enough power at a low cost. For that, major dams/ hydropower stations have to be built.

It is necessary that producers and traders pay their taxes honestly. The problem is that the country has too many taxes and too little of tax revenues. Federal revenues are now 10 per cent of the GDP , despite the recent rapid expansion of the economy. As the economy expanded, the revenue shrank as a percentage of the GDP.

Mr Shaukat Aziz said there should be only three taxes: sales tax, income tax and customs duty And that the customs duties were a vanishing revenue while the tax of the future was the sales tax. He raised the sales tax to 15 from 12 per cent and went on increasing other taxes. He collected huge amount of revenues but the share of the taxes in the expanding economy went down.

Businessmen complain that the cumulative impact of taxes is heavy. This creates an environment in which corruption flourishes and tax evasion thrives. This makes tax reforms essential and urgent. However to curb massive inflow of imported goods and to reduce the current deficit, the government had to raise customs duty on the import of non-essential items.

The government’s hands are tied in too many ways. It needs more revenues to finance development projects, particularly the large dams and the new power houses but can’t find enough money.

Anyway, to hope that the business men will give too much of their incomes as taxes is out of question.

Speculators dealing with land and shares have made large windfall gains. Such gains should be taxed and such incomes should not be spared. While an ordinary citizen who has a cold drink pays 15 per cent sales tax, there is no reason why speculators should go scot-free. Taxation has to become rational and fair to all. There is immense potential to raise tax revenue from farm incomes and the service sector.

While the tax-to-GDP ratio has to be increased significantly, an enabling environment should be created for the market players., awash with money, to invest in the real sector of the economy.