ISLAMABAD: Finance Adviser Hafeez Shaikh on Wednesday underscored the need of borrowing to continue development expenditures as he said increasing tax revenue is not possible amid growth contraction.
Shaikh said incurring more expenditure to provide for the people at or below the poverty line will require more borrowing.
“It would not be possible to increase taxes at a time of declining growth in the economy,” he said addressing an interactive session of the International Monetary Fund (IMF) Managing Director Kristalina Georgieva with ministers and governors of the region through a video link.
“If the government wants to continue economic reforms, there are two real challenges – arranging funding for pro-poor expenditures and prioritising the need for development spending.”
Finance adviser said there is a need to adopt a coherent strategy with the partner countries in the region for development.
“No matter how fair or transparent the governments are in their intentions and operations this unusual situation has made them realise that there is a need for taking support from their friends and development partners in the form of technical advice and financial support and for that all must contribute,” he said.
Shaikh said the pandemic has undone a considerable share of the achievements of the government in Pakistan.
“Though there were fiscal constraints, after the pandemic, the government has devised a strategy to provide whatever it can to its people and businesses by direct cash transfers and sharing the load of various expenditures of the small businesses,” he said.
The discussion focused on the impact of coronavirus on the economies of the region, lessons learnt through the experiences and policy guidelines to be adopted to deal with the crisis of such magnitude which has caught the world by surprise.
The participants highlighted the need to play a more effective role as a multilateral development partner whose advice would be of much value and importance according to the needs of the changing times.
The participants agreed that the virus has exposed the world’s need for health spending and to focus more on technological solutions to various problems. It was observed that after the first wave of the pandemic almost all the countries have lost a significant share of their GDP and unemployment has become the biggest challenge.
It was agreed if the second wave comes, losses will be massive and the achievement made by some countries during the crisis will be lost if the preventive measures are not adopted as a part of their everyday life.
The participants praised the debt suspension initiative of the G-20 and said that there is also a need to provide more finances to the vulnerable economies.
It was a consensus that employment generation, equality and inclusion will be the new challenges from the perspective of women and youth and new strategies will be needed to help the women and youth in the region.