Structural reforms can avert fiscal crisis

Islamabad : Former Finance Minister and PML-N leader Sartaj Aziz has said that the government in medium term should identify labour intensive growth areas and technology oriented for sustained growth.

Mr Aziz was speaking at National Symposium on “State of the economy,” organised by Sustainable Development Policy Institute (SDPI) in collaboration with Beaconhouse National University.

Mr Aziz said that that we should not overlook poverty and other social sectors. We should rather take measures to expand the social safety net for the vulnerable groups with the help of technology, he said adding that the government should be mindful while choosing those short term measures which do not affect the growth rate. He asked the government to implement Pakistan’s first ever Water Policy which was approved in April 2018 to overcome water sector challenges.

Former Finance Minister Dr Hafeez A Pasha said that our revenues are 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 declined in absolute terms. He said that the problem lies with the revenue projections, which require adjustments. He said that the government, in short term, should raise tax exemption limit on income tax to PKR 800 thousand, whereas tariff rates need to be brought down from 30 per cent to 25 percent 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 proposed a programme of right sizing of the Federal Government to cut the expenditure.

He said that there are three areas that require serious attention in PSDP, i.e, water, power distribution and transmission and CPEC which are engines of growth in the long term.

Dr Abid Qaiyum Suleri, Executive Director, SDPI, said that it is unfortunate that the economy is such a subject being politicised in Pakistan. He said that 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 in the country. He said our aim is to provide independent advice to the government on policy issues.

Shahid H. Kardar, Vice Chancellor, Beaconhouse National University, said that today Pakistan’s economy faces serious challenges of current account deficit and the trade deficit, which reaching exceptionally high levels. He said that the foreign exchange reserves are at a perilously low level and continuously under stress. To check the increasing vulnerability of the rupee, the economy has to be stabilised on, more or less, emergency basis, he added.

Dr Vaqar Ahmed from SDPI said that more such debates around the future strategic direction of Pakistan economy are needed than ever before. He said that the new government is about to announce key changes to the fiscal policy – hence providing evidence-based advice to the government at this stage is extremely important.