ESCAP advocates policies for stabilisation, growth

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ISLAMABAD: While launching the United Nations Economic and Social Commission for Asia and Pacific (ESCAP) survey on forward-looking macroeconomic policies, Dr Ashfaque H Khan, ex-economic advisor, said that the upcoming government would have to take tough decisions during the first 100 days by bringing big feudal lords, doctors, lawyers, and beauty parlors into the tax net to ensure the broadening the tax base. “As we have seen the tax defaulters have got through the scrutiny process. It will be a dilemma as to how the government will introduce reforms to broaden the tax base,” he said.

“I would suggest that the upcoming government introduce reforms by bringing big agriculturists and other services into the tax net to broaden the narrowed tax base,” said Dr Khan while launching the survey on Thursday.

The ESCAP’s report mainly advocated pursuance of forward-looking macroeconomic policies under which stabilisation and growth are focused simultaneously instead of only stabilisation as practiced by economists in line with the International Monetary Fund/World Bank approach.

Noting that the region’s economic progress has been marked by widening income inequalities and acute depletion of natural resources, the survey argued that macroeconomic policies could play a vital role in reorienting the region towards a more inclusive and sustainable growth path - a high priority of its post-2015 development agenda.

Talking about reform agenda for the upcoming government, Dr Khan said that they would have to demonstrate ‘political will’ for increasing tax to GDP ratio. “Enough is enough”, this should be the message given to all as there is no other option but to bring all kinds of income into the tax net.

The ESCAP survey has projected Pakistan’s GDP growth at 3.5 percent for the current fiscal 2012-13. While narrating major challenges for Pakistan’s economy, the ESCAP forecasted that the curtailing of budget deficit would be quite hard for the country, keeping in view narrowed tax base and tight expenditures.

“The persistent energy crisis coupled with weak fiscal fundamentals are major weak areas of Pakistan,” he cited the survey, saying that without improving energy and fiscal balance the country could not achieve higher growth on sustainable basis.

“The main message of this report is that there is a need to reorient macroeconomic policies where focus on stabilisation and growth should be given simultaneously,” he added.

The ESCAP report stated that the unemployment rate in Pakistan stood at six percent and low productivity and low paying jobs are the major problems in the country like many other South Asian countries.

The report stated that Pakistan finds it difficult to contain budget deficit, estimated at 8.5 percent of GDP in 2012 against 6.6 percent in 2011.

Efforts are underway to move towards two main taxes i.e. income and sales taxes. On the expenditure side, austerity measures are to be adopted.

However, the report stated that the policy of not passing the burden of oil price and power cost hikes on to end-users to ensure the safety net for the vulnerable group, has added to the government expenditures.

“Solving energy sector problems will help macroeconomic stability through improving GDP growth, higher revenues and less subsidy expenditures,” it added.

The balance of payment position came under pressure due to declining financial inflows and substantial external debt repayments. Resultantly, foreign exchange reserves decreased and domestic currency depreciated against the US Dollar, the report added.

 

Courtesy: The News


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