The Damage Needs Assessment (DNA) undertaken by the World Bank and the Asian Development Bank has been completed and the estimated loss wrought by the devastating August/September floods is 9.3 billion dollars, based on its historic cost. Current replacement cost is between 25 to 30 billion dollars. This estimate is inexplicably lower than what was announced by the Prime Minister and the Foreign Minister by a whopping 13 billion dollars.This is inexplicable because the two multilateral agencies, as well as the federal/provincial governments were compelled to rely on the same source for assessment of the damages: the district government. A tendency prevalent in government circles is to argue that it is preferable to overstate the need as the international community would in any event provide considerably lower than what is requested. This is a simplistic approach and would merely widen the trust deficit that the international community has with regard to the debtor government.
While in their defence, members of the executive would no doubt point out that they had time and again cautioned that their assessment was, at best, very preliminary and that they would rely on the two multilateral agencies to compile data released by the affected districts, yet it is very likely that such a large divergence in the loss of data may only widen the trust deficit that the international community has made known in recent months.
This deficit ranges from accusations that the international community will not provide assistance if the Pakistan government continues to exempt its elite from the payment of income tax to claims that the government has done little to curtail its own profligacy to the failure of the government to formulate an accountability law that would ensure transparency of money spent on rehabilitation and reconstruction activities.
With the DNA now complete, it is now the Federal Finance Ministry that must take some very difficult decisions. The Federal Board of Revenue (FBR) has already made a number of proposals based on different loss assessments, for example by how much to raise a particular existing tax to generate a given amount or what should be the rate of a new flood tax to generate a specific amount. It is now up to the Finance Ministry to accept or reject any proposal or indeed to come up with any entirely new proposal.
The government must be careful not to impose a tax which may not go down well with the public. This is specially so given that some budgetary as well as post-budgetary expenditure need to be revisited on an emergent basis in the context of the damage caused by the floods.These include the 50 percent budgetary salary raise for all bureaucrats, at a total cost of over 70 billion rupees, the reinstatement of 9000 pro-PPP employees likely to cost the exchequer 21 billion rupees which was not a component of the budget, and the construction of the National Assembly Employees Housing Co-operative costing another 10 billion rupees.Thus, it is imperative that careful consideration be given to each and every rupee spent by the government during the rest of the financial year, resulting in the widespread public perception (domestically as well as internationally) that the government is significantly tightening its own belt.
In addition, the Finance Ministry must come up with tax proposals that are deemed to be fair, an effort must be made to end exemptions and in this context one can only hope that a tax on the income of rich landlords must be imposed, and at the same time, it is necessary for the government to strengthen its anti-corruption laws, especially as they pertain to what was acknowledged by the former Finance Minister, Shaukat Tarin, as the most corrupt organisation in this country: the tax collecting FBR.
In addition, ideally, the government should have developed its capacity to undertake the DNA, which is essentially a compilation of data from various districts, given that this is the second time in five years that this hapless country has been subjected to a natural disaster. While the two multilateral agencies have undertaken the DNA free of cost, yet it is critical for the government to strengthen the Disaster Management Authority to ensure that it has the capacity to compile nation-wide data, as and when it receives it. Only Sub-Sahara African states rely on external sources to evaluate the extent of famine or natural disasters. India, for example, did not call on any external agency to assess its tsunami damage – Brecorder