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Threat of growing black economy

It is not only the challenge of Cvoid-19 pandemic looming on the horizon of country’s economy, but also it is growing size of black economy, outcome of corrupt practices flourishing with dimensions like manipulation of funds allocated for development expenditures, hoarding of essential items of consumption, money laundering, clandestine terror financing, smuggling, under and over invoicing, speculative trading in stock exchange securities and properties and tax evasion etc. Resultantly apart from fuelling inflation it has made Herculean task for government to come out of grey list of Financial Action Task Force (FATF).

Due to corrupt environment even very sound monetary and fiscal policies in place have failed to control unbridled inflation not only making life of common man miserable, but also causing loss of revenue to the government and above all depletion of Human Development Indicators (HDIs), linked to the status of social sector development, thus causing immense damage to formal economy.

Findings of various surveys conducted by World Bank from time to time have placed Pakistan at 170th position among 180 nations, while enumerating the list on the basis of extent of corruption in listed countries. The cause of concern was rampant corruption aggravating income inequality and poverty position. Besides that lack of good governance and transparency has not only impeded the inflow of foreign investment, but also aid/loan giving agencies particularly IMF attached innumerable conditionalities for providing funding.

The key factors identified through various national and international studies are:

  1. a) It is the universally accepted notion regarding a government is that its role is to rise above private interest to protect broader public interest. Unfortunately it is general trend in Pakistan that people holding public offices favour particular group or individual linked to their ethnic, political and geographical interest. Illegal gratification is considered an easy way or rather norm of life to get the things done by people holding public offices. Hence service and benefits meant for general public concentrate in the hands of privilege few.
  2. b) Discriminatory application of rule of law. Where rule of law and accountability is for general public, whereas privileged class from where illegal gratification is expected is taken above law and not accountable for their misdeeds, thus public offices which are meant for protecting public interest, nepotism allows floundering of rule of law and accountability.

In Pakistan law enforcement department that is police is directly responsible for encourage violation of law by citizens. Role of judiciary, which is a supreme institution to ensure rule of law in the country, cannot be taken as totally transparent and independent of establishment. Hence rule of law is widely compromised.

Another factor highlighted in World Bank’s survey report, which has provided strong hold to corruption in sample study countries is ineffective accountability process. To combat corruption and floundering rule of law effective need for effective accountability agencies was stressed. Pakistan’s National Accountability Bureau is no doubt striving to arrest rising trend of corruption and other illegal practices among public officials at all level, yet their efforts due to slow process or due to influence exercised by those who abuse powers are sometimes found ineffective in nabbing the source of corruption and culprits are exonerated from charges levied against them. There are several cases of money laundering, amassing wealth beyond means and heavy bank defaults, but nothing concrete has been done so far.

Lack of commitment with legislatures/parliamentarians and bureaucracy to fight corruption has also been identified as one of the reasons giving fillip to corrupt practices in countries becoming part of the sample survey of World Bank. The survey report emphasis that corruption emanates from upper echelons of the society and penetrates down the line in all spheres of economic, social and political set up of the countries.

In case of Pakistan integrity of parliamentarians and bureaucrats and those holding positions in public sector entities and quite a number of owners of private sector entities specially in the field of education cannot be said beyond doubt in all cases. It is a known fact that few parliamentarians for obtaining legibility to contest provincial and national assembly elections submitted fake degrees to the election commission. What can one expects from such leaders devoid of moral values. For winning elections millions of rupees are doled out to masses who being illiterate consider these unethical practices a way of life.

The legislatures both from opposition and ruling parties are continuously busy in leg pulling and power grabbing endeavours and ruling party is always found in defensive role instead of looking into important socio economic issues demanding immediate attention.

Various past regimes also took action against corrupt officials, majority of them being part of underworld mafia regained their influence after every change of government. In a way corruption has become a culture of the country and common man has learnt to live with these odds.

Present government in order to combat corruption and unethical practices has speeded up the process of accountability. However little improvement is visible as proportion of corrupt practices has inflated to the extent that sometimes even these agencies hesitate to take action in time against dishonest persons and sometimes officials of these agencies are victimised for pinpointing corrupt doings.

In this regard government need to expedite putting in place/revive local governments countrywide as the devolution of power is the only way to tackle the problem effectively, which is likely to ensure transparency and good governance. The functionaries of local governments like nazim, naib nazim and councillors etc belonging to the area they are looking after and being in direct contact with inmates of their areas neither they themselves can indulge in corrupt practices nor residents of their area can dare to get involved in unethical businesses freely. In other words environment conducive to corrupt practices is difficult to be developed under this system.

Stagnant growth position of the economy, which has further worsened because of onslaught of Covid-19 as IMF latest forecast depicted in Economic Outlook survey for 2020 indicates 1 percent GDP growth, inflation going up to 8.8 percent on the average, unemployment rising by another 5.1 percent.

Pakistan’s Human Development Indicators (HDIs) relating to education and health care etc are lowest even among SAARC countries. Half of the population still remains illiterate. Since society as whole is least gender sensitized, average rate of literacy among women is 45 percent. Due to corrupt practices funds allocated for education are being widely misused.

The number of ghost teachers continue to grow unabated in all the four provinces. To check this malpractice vigorous monitoring and supervision by agencies other than functionaries of education departments is needed. As stated above the functionaries of local governments who also come within the ambit of accountability, they in collaboration with well reputed senior citizens can form monitoring/supervisory committees at each union council level to frequently check activities/performance of management and teaching staff of all educational institutions in their area of responsibility.

These monitoring committees can have surveillance on health sector also. Working of hospitals and dispensaries should be monitored by these ‘watch dog‘ committees. This will ensure proper utilization of funds and positive growth of social sector. However, effectiveness of such monitoring/watchdog committees depends on initiative on the part of general public to bring to notice (without any hesitation) of these agencies all unethical and corrupt practices going on to enable them to take immediate action and nab the evil at the very source.

IMF’s code of good practices on fiscal transparency and, applicable to all countries, recipients of funding has emphasis on e-government initiatives. This has prompted all business concerns, government agencies and individuals to use the internet or electronic/digital services for payment of utility bills, taxes and to keep Agra on custom duties settlement etc. However by making it mandatory government can widen tax net and prevent substantial loss of revenue encountered every year.

Introduction of biometric check in banking transactions and opening of accounts has also reduced money laundering and benami financial transactions to do away with terror financing.

In low and middle income countries monitoring by funding agencies like World Bank etc have also been found effective in arresting corrupt practices particularly from social sector development programs. It is particularly poverty alleviation program introduced in Pakistan where strict monitoring by funding agencies has prevented misuse of funds. However, it is desirable that efforts should be intensified for putting in place good governance and transparency in all reporting to public as well as funding agencies to come out of the list of corrupt nations.

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