The newly appointed finance minister faces two critical challenges to revive the economy. The first one is the external trade imbalance – at present, export earnings cover just 50 percent of the country’s imports, resulting in the trade deficit. The agriculture sector has been underperforming for quite some time, and the manufacturing sector is facing capacity constraint with low investment. Therefore, the government’s focus should be on compressing the import of luxury/unnecessary foreign items as well those goods that are being produced locally. This step will help it save between $8 and 10 billion. The second challenge is the narrow tax base. An increase of around 50 percent is required in tax collection to balance the budget. Can the finance minister expand the tax base by bringing tax evaders into the tax net?
The finance minister needs to introduce well-thought-out policies and and take bold decisions to revive the economy.
Shoaib A Majeed
Karachi
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