Page 31 - Accountant Jan-Mar 2019

Tax evasion economy is facing severe Balance of the central bank or the external donors. If in the form Payments (BoP) difficulties amid larger fiscal financed by the central bank, it might create and current account deficits, a visible decline a more risky situation by giving way to high of tactics is in foreign exchange reserves and mounting inflation, thus, harming the middle and poor being used pressures on the domestic currency. Macro- class with fixed income and wages. But if economic imbalances and financial fragilities we choose to go for external donors like by both local pose significant risks of future slowdown.” International Monetary Fund (IMF), paying and foreign foreign debts along with high interest rates companies Challenges facing the economy puts the country in a high debt situation which keeps multiplying as to pay these operating At present, the economic outlook of Pakistan loans; the government borrows more and is both critical and fragile, being affected in Pakistan by both domestic and global factors due more, thus, entering into a bigger debt trap. whereby to which the economy is moving towards a ▪ As per the latest data released by central bank of the country, the federal considerable decline in all areas. The internal they hire and external challenges facing the country government’s borrowings for budgetary experienced are, like for instance: support from the banking system have surged by 86% to Rs. 722 billion during professionals ▪ Lack of efficient and well-organised the first half of financial year 2018-2019 as governance system and institution in to help them practice. Incompetence, inefficiency and compared to Rs. 387.7 billion in the same design their lethargic attitude of the leaders on top period of last year. Most troublesome fact is that borrowings from central bank have results in corrupt and unethical practices financial down the line, which in turn, brings about jumped by Rs. 1.436 trillion during the first statements in a fall in the economic growth. Lack of half of financial year 2018-2019 as compared to Rs. 288 billion in the same period of last such a way planning coupled with lack of consensus year. This substantial shift of government and coordination at the top government that minimum functionaries and beauracratic levels in borrowings from scheduled banks to the profits are respect of opportunities available results central bank happened as a result of maturity of Pakistan Investment Bonds (PIBs) and shown on in non-utlilisation of human and capital unwillingness of scheduled banks to reinvest resources. Non-accountability of the corrupt face, thus, and lack of transparency is one of the biggest in these bonds due to unattractive rates resulting in the loopholes in the present governance system. of interest. Such an act would ultimately lead to inflationary pressures, thus, forcing ▪ Due to the poor evaluation and payment of implementation of the fiscal policy along authorities to tighten the monetary policy least possible with frequent changes in these policies, fiscal and devalue the currency further which, in turn, would increase the debt servicing cost taxes. policy in combination with the monetary of the government and make the life of the policy fails to achieve the objectives that it is designed for; which includes; creating ordinary man more miserable. job employment, poverty reduction, and ▪ In order to cope up with the internal development of human and physical financial crises, the country has looked out infrastructure, stabilising prices and wages for external financing from IMF, World Bank and curtailing inflation. The higher fiscal and other friendly countries from time to deficit is essentially due to revenue collection time. Heavy reliance on foreign borrowings shortfall (both tax and non-tax), slow is like compromising the national security of foreign inflows, and a significant increase the country. But do we have other options? in current expenditures while development When we are exhausted with our domestic expenditures have come to a halt. Average borrowings, we are left no option than to Consumer Price Index (CPI) inflation stands beg at the doors of the developed nations Our defective at six percent for the first half of financial and agencies. Borrowings from external sources, which is rising at an unprecedented year 2018-2019 as compared to 3.8 percent foreign policies in the same period of last year. Core inflation, speed, also includes accepting their have already as measured by the non-food non-energy unsolicited terms and conditions being deprived us of components of the CPI basket had reached part of the package, which, in turn, creates 8.4% in December 2018. Accordingly, as per even a bigger problem in devising our many golden the trend, the fiscal deficit in the first half of national laws and policies to run the country opportunities 2019 is expected to be higher than the same independently. ▪ Tax revenue is one area where the affluent period last year. Now, this fiscal deficit is to in the past. be financed through somewhere either from and powerful ones play the most. Currently, January - March 2019 The Pakistan Accountant 29