Growth rate not enough to create employment: IMF

KARACHI: International Monetary Fund (IMF) has found the economic growth rate of Pakistan not enough to create more employment, its official said on Wednesday.
Although Pakistan’s GDP growth improved to 4.1 percent it was not as fast as was needed to create more employment, said Tokhir Mirzoev, resident representative at the IMF, speaking during a visit to the Karachi Chamber of Commerce and Industry (KCCI).
Mirzoev said Pakistan’s economy was gradually improving and heading towards stability as various economic indicators were progressing well due to lower oil prices, lesser inflation, robust remittances and sustained foreign reserves.
Commenting further on the prevailing economic scenario in the backdrop of lower oil prices, Mirzoev said that luckily, it created opportunities and now it all depended on how Pakistan used it.
In order to ensure that the economy stays on track, structural reforms were needed to improve the overall tax base and the business climate of the country, he stressed.
Advocating the KCCI’s demand to bring maximum number of tax evaders into the tax net, Mirzoev said that relying on borrowings was not the right option. Pakistan must raise its revenue by enhancing the taxpayers’ base so that the revenue generated could be utilised on various development projects pertaining to energy, health and education, etc.
He said taxation remained a significant issue in Pakistan, and even though tax-to-GDP ratio had been increasing for the last two years, it remains low at around 10 percent. Efforts must be made to raise it to somewhere around 20 percent.
“The first option, which is the best way to achieve revenue target, is to widen the taxpayers’ base and the second option is to raise the tax rate for the existing taxpayers. We (the IMF) are in favour of the first option,” he opined. Political will, vision and a clear strategy along with capacity building and training were needed to overcome the issues being faced by Pakistan, he added.
He further pointed out that key priorities of the IMF programme included improving the energy sector; widening the tax net, improving the business climate, and further strengthening external reserve buffers. Strong implementation of reforms in these areas, as envisaged in the programme, will transform Pakistan into a dynamic emerging market economy.
Highlighting the purpose of his visit to KCCI, the IMF resident representative said, “IMF is keen to establish contact with KCCI so that we can exchange ideas on how we can work together.”
KCCI President Iftikhar Ahmed Vohra appreciated the IMF authorities for preferring to take the KCCI’s input on the overall business climate and how the business community felt about the economic challenges being faced by the country. He said that instead of raising the taxes, the government should be urged to bring maximum number of tax evaders into the net.
“The Karachi chamber has been raising this serious issue on various occasions, as we strongly believe Pakistan will never be able to come out of crisis unless the number of taxpayers is enhanced,” he added.