Former finance minister paint bleak picture of economy
Propose structural reforms to avert fiscal crisis; implementation of water policy; raise in tax-exemption limit on income
Former finance ministers and economists on Thursday painted a bleak picture of Pakistan’s economy, suggesting structural reforms at all levels to prevent imminent crisis.
“Pakistan’s current economic outlook is not very much promising. It is facing serious pressures on the fiscal, monetary and trade accounts facades,” they said while addressing a symposium on state of the economy, organised by Sustainable Development Policy Institute (SDPI) in collaboration with Beaconhouse National University (BNU) at a local hotel
They said that to ease pressures attributed to current account deficit, the government would need to focus on curtailing non-essential imports, promoting competitiveness of exporting enterprises, attracting foreign direct investment, and encouraging greater remittance inflows.
Former federal finance and foreign minister Sartaj Aziz said that the government in medium-term should identify growth areas which are labour intensive and technology-oriented for sustained growth.
The senior Pakistan Muslim League-Nawaz leader said, “We should not overlook poverty and other social sectors.”
He suggested measures to expand the social safety net for the vulnerable group through the help of technology.
The government should be mindful while choosing those short- term measures which should not affect the growth rate.
He stressed the government to implement Pakistan’s first-ever water policy which was approved in April 2018 to overcome water challenges.
Dr Hafeez Pasha, another former finance minister, spoke on fiscal issues and said that revenues were not diverse enough and development expenditure phenomenally high all the times.
He said that the structural problem in last few years is net revenue receipt of the federal government that had actually decline in absolute terms, even though FBR targets grown up which are mainly non-tax revenues and non-FBR taxes.
Pasha, who is professor at the BNU, also said that the problem lies with the revenue projections, which require adjustments.
He suggested that the incumbent government, in short term, should raise tax exemption limit on income tax to Rs800,000, whereas tariff rates need to be brought down from 30 per cent to 25 per cent while revising the finance bill 2017. He said that the government should liberalise the economy while bringing down the tariffs on imports.
He suggested steps to expand the tax base, such as compulsory filing of returns by the citizen and registered companies etc. Moreover, he suggested the programme rightsizing of the deferral government to cut the expenditure.
Pasha further said that there are three areas that require serious attention in PSDP; water, power distribution and transmission and CPEC which are an engine of growth in the long term.
Former State Bank governor Shahid Hussain Kardar said that the economy was facing serious challenges of current account deficit and trade deficit, which have reached exceptionally high levels.
He said that the foreign exchange reserves are at a perilously low level and continuously under stress.
Kardar who is BNU Vice-Chancellor said to check the increasing vulnerability of the rupee the economy has to be stabilised on emergency basis, he added.
SDPI Executive Director Dr Abid Qaiyum Suleri said macroeconomic imbalances, if not addressed in time, can also put the newfound economic growth in danger and could threaten the prospects of longer term sustainable development.
He said our aim is to provide independent advice to the government on policy issues.