Should Pakistan receive international aid?

When Pakistan came into being, it was in a desperate situation, so it needed aid. But it should have been a temporary measure, like the Marshall Plan for Europe. Unfortunately, Pakistan became dependent on aid and that is where our problems started, because the ruling elite use aid to finance their lavish lifestyle rather than [address] a temporary problem of balancing your fiscal deficit, your expenditure and your revenues. We never had an austerity programme in Pakistan, so all this aid basically financed the elite and they got hooked on to it. There was no readjustment. The current government is the most corrupt in our history. If it wasn’t for aid, this government would have collapsed.

What damage has it done?

There are two problems with it. First, it stops us making the reforms to restructure our economy. If you have a fiscal deficit, you will be forced to cut your expenditure and you will do everything to raise your revenues. This important development did not take place, because of aid. Second, IMF loans. These two things have propped up crooked governments who have used the poor to service the debt through indirect taxation. The poor subsidise the rich in Pakistan. The ruling elite just don’t pay taxes – all the taxes are paid by the common people.

Is it true that only two million people out of a total 180 million pay tax?

And 61 per cent of the parliamentarians don’t pay any tax. [The ex-premier] Nawaz Sharif didn’t pay any tax. He’s a dollar billionaire. Three years ago he paid 5,000 rupees in tax, which is $60. The prime minister, Yousuf Gilani [stripped of his title on 19 June], who has become a millionaire, never paid tax.

If you were PM, would you cancel all international aid from the US and UK?

No, I specifically said do not give money to this government. If we do need money, it has to be short term. In the medium term and long term, someone must put this house in order. If a genuinely democratic government wins the elections it has to help the people, with schools, health care, everything.

But can you survive without any aid at all?

Of course we can. We collect roughly 1.8 trillion rupees tax. Our expenditure is three trillion rupees. Pakistan has the lowest tax-GDP ratio, and our tax potential is minimum four trillion rupees. So Pakistan doesn’t need aid if it can collect its taxes.

How do you persuade the rich to pay tax?

First, I would remove all exemptions given to various sectors. For instance, there is no agriculture income tax. They have just passed an ordinance that if you buy stocks there are no questions asked, so again you can whiten your black money. Then there is no real-estate tax because all the rich people, powerful people, are involved in real estate. Second, the ruling elite must have austerity. In order to make people realise that tax is going in the right direction, you must cut down the extravagance. The president and the PM of Pakistan would put David Cameron to shame.

Why not just tackle the corruption, rather than cancelling all aid?

The two things go together. For Pakistan to survive, it has to tackle corruption, but a country must stand on its own feet.

Has the military been equally corrupt?

The military budget has not been under the view of the government, but if you want austerity, everyone has to chip in. Civilian governments have not been strong enough to challenge military expenditure.

Some say you’re naive to think that Pakistan can cope without international assistance.

I tell them that there have been examples of people who’ve done it. Compared to Turkey, Pakistan has enormous resources, the most fertile land, the biggest copper reserves. We should be one of the fastest-growing countries in the world. The reason we can’t go forward is governance. All the countries that have gone forward, like Malaysia and now Turkey, have fixed their government system. The problem with aid is that it stops you from making those reforms.

Interview by Mehdi Hasan