Need to improve tax-to-GDP ratio: Ahsan Iqbal

Islamabad : Federal Minister for Planning, Development, and Special Initiatives, Ahsan Iqbal has said that we need to emphasise our tax-to-GDP ratio, which was around 16-18 per cent previously but is now reduced to 9 per cent only.

Mr Iqbal was speaking at a discussion on “How to improve exports in Pakistan” organised here by Pakistan Institute of Development Economies (PIDE) University located on the Quaid-e-Azam University premises.

He said that we need more investment, both local and foreign. It will make us less dependent on the IMF. The biggest challenge is how to increase exports from $32 billion to $100 billion. For this, we need to find new products and markets, he stressed.

He also said to analyse how foreign aid was linked with growth previously. During the era of 1980s, Pakistan got many projects and easy money. In the 1990s, we faced sanctions and the IMF asked us for commercial borrowing which escalated our debt servicing. In 2018, we had debt servicing of around 1500 billion which increased to around 4500 billion recently. It leaves us no space for a development budget, he observed.

Earlier, Dr. Nadeem ul Haque, Vice-Chancellor, of PIDE University emphasised that the regulatory system such as unnecessary documentation, taxation, and NOC is the biggest problem in Pakistan. He said around 122 regulatory agencies collect taxes and does not contribute to productivity. Corporate governance is not very encouraging and just 31 families in Pakistan are involved in import substitution and our industrial policies just protect them. The stock market in Pakistan is not financing exporting industries but import substitution.

Researchers from PIDE University focused on the historical trend of exports and economic growth in Pakistan. The reasons for the trade deficit are low export competitiveness and a few product lines. Both productivity and investment are declining over time. We previously used development money for consumption, resulting in the lowest productivity in the region compared to Bangladesh, China, India, and Sir Lanka. Although we have had volatile productivity in Pakistan recently, data shows that Pakistan’s performance is not very impressive. Data on exports show that we export mainly primary goods, which disconnects us from the global supply chain. Overall, Pakistan exports textile-related products and we just target a few product lines exports, observed the researchers.

Participants of the meeting further added that the lack of competitiveness is another factor that is coupled with the high cost of commercial energy. Pakistan has the highest commercial energy compared to India and Bangladesh. Another factor is the poor logistic performance they opined adding that Pakistan relies mainly on road transport and we need to promote railways for freight trade.