Despite being positioned in a region that is labelled as the “fastest growing one in the world”, Pakistan’s economic growth is projected to stand at a moderate 4.4 per cent for the ongoing fiscal year. While the figure itself does not come as a surprise since the government’s target hovers around the 5.1 per cent mark and is in line with expectations of the IMF and the ADB, the projection — when placed next to Pakistan’s regional peers — serves as cruel reminder of how far behind the country really is. The World Bank, in its twice-a-year South Asia Economic Focus report, placed Pakistan second-to-last among the eight regional economies, with India (7.5 per cent), Sri Lanka (6.9 per cent) and Bhutan (6.7 per cent) in the top three.
Bangladesh and Nepal also stand ahead of Pakistan with Afghanistan the only country that lags behind us. However, in projections for next year, even Afghanistan is projected to move past Pakistan. The reason why South Asia remains at an advantage in the current situation is that the region is largely an oil importer. With the global plunge in crude oil prices, the region stands to benefit immensely. While this is the ideal time for fiscal consolidation and reforms in the energy sector — which include cutting subsidies and spending the savings in investment-led projects and tackling power losses — Pakistan remains occupied with issues of terrorism and conflict. There is no denying that the country has made progress in the last few years. From its attempts to address the power crisis to increasing foreign exchange reserves out of the red zone and privatising — albeit being only able to do so with profit-making entities — the country has been steered to a slightly better position. The IMF and other bodies admit that reforms are on track. However, what stops Pakistan in moving from a situation that is slightly bearable to economically sustainable are all the cliched reasons. Low tax revenue, despite the four mini-budgets, is the biggest hindrance to growth. How do you even expect to improve if the tax revenue does not increase at the pace it is supposed to, while spending needs and wants continuing to grow? The government has only looked at increasing collection through indirect methods. It is time for it to massively reform the Federal Board of Revenue and broaden the tax net.
Published in The Express Tribune, April 16th, 2015.