Reforms needed to ensure sustainable growth in Pakistan
A REUTERS FILE IMAGE
Federation of Pakistan Chambers of Commerce and Industry President Mian Anjum Nisar has stressed the need for serious structural reforms, with a keen focus on value-addition for a sustainable economic growth.
He recommended the government to raise exports to double digit of the GDP till the end of its term, as Pakistan’s exports have bounced back after witnessing decline in the last four months. The country’s exports have fetched $1.99 billion in July 2020, witnessing 5.8% growth in dollar terms.
Nisar said that consistent borrowing by developing economies to shore up its reserves in desperate times is only leading towards a debt trap. He said that borrowing from friendly countries should only be seen as a short-term solution to prevent reserves’ depletion and consequent further depreciation of the currency.
He also stressed that focus should be on promoting exports and restricting imports alongside making domestic industry more competitive and subsequently expanding its export market.
“Exports of goods and services are an injection into the circular flow of income, which lead to a rise in aggregate demand and an expansion of output, helping raise per capita incomes and reduce extreme poverty especially in developing economies like Pakistan.”
He said that world trade has still not come out of the dip in the wake of the coronavirus pandemic, as exports of regional countries including India and Bangladesh registered a decline but Pakistan’s exports bounced back, reporting around 5% growth in July 2020 compared with regional players.
Regarding market diversification, the FPCCI president pointed out that not much progress has been shown in this regard, as exports still seem to be heavily dependent on traditional export markets. He underlined the need for evaluating geographical diversification in order to re-align the focus towards new opportunities.
The government agencies will have to extend all kind of necessary support to the exporters in order to achieve the targets, not only in terms of numbers but also with regards to intended policy outcomes.
While talking about tax policy, he maintained that the existing tax system is heavily skewed toward indirect taxation and direct tax can certainly improve tax collection in some instances.
He was of the view that a sustainable solution to Pakistan’s problems lies in structural reforms, as we can see very large inefficiencies in tax collection.
“So, the tax compliance must be improved and tax base be broadened. This cannot be achieved with a single policy change, but by a systemic approach,” he added.
He emphasised that concentrating on import substitution is imperative to narrow import bills and certain imported products such as oil are of a fixed nature, therefore, the government needs to enhance focus on import substitution industries, as chemicals, agriculture and steel are potential industries.
He said that undertaking structural reforms require political will, adding that early signs from the government are positive and exhibit zero-tolerance against corruption. He said that enacting structural reforms, such as improvements in tax collection system, bureaucracy and ease of doing business requires major political will and strict implementation of policies, he added.
Quoting the central bank report, the FPCCI president said the current account deficit contracted to a six-year low, foreign exchange reserves increased, primary budget recorded a surplus, and core inflation eased. Importantly, export-based manufacturing showed signs of traction and construction activities picked up, indicating that the economy was on the path of recovery.
However, further improvements need serious structural reforms to put the economy on a firm path of sustainable growth.
Published in The Express Tribune, August 30th, 2020.
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