KARACHI: Caretaker Finance Minister Dr. Shamshad Akhtar, during a visit to the Pakistan Stock Exchange on Saturday, appeared upbeat over Pakistan’s growth performance for 2018 as real GDP grew by 5.8 percent.
She elaborated that this growth is an outcome of combination of factors including the good performance of both agriculture sector and industry.
More notably has been the rise in contribution of services sector over the years to over 59 percent in GDP. The growth has been further driven by rising aggregate demand as consumption and investment were quite strong.
However, the minister expressed concern over the build-up of twin fiscal and external deficits that has complicated effective macroeconomic management.
The minister said that the interim government is taking steps within its limited mandate to push for stability, but clarified that it has no intention to seek assistance from the International Monetary Fund (IMF).
She said that current trends underscore significance of short-term stabilization program, but needs to be complimented by long-term structural reforms to macroeconomic sustainability.
She said that interim government is undertaking the necessary diagnostics of the situation and analysis which hopefully will serve as useful input for incoming government to take appropriate decisions and steps.
The caretaker minister emphasised that the country needs extensive economic policy and institutional reforms to ensure growth and stabilization are well sequenced.
The two key priorities, critical for long term stability and development for Pakistan, ought to be domestic resource mobilization and a strong export diversification drive which will help resolve country’s domestic and external vulnerabilities in most effective manner.
Pakistan can ill-afford to deploy its foreign exchange reserves regularly for imports — imports are needed but needto be accompanied by high export revenues or foreign flows, she added.
Furthermore, she said that the immediate challenge remains the external current account deficit which reached its highest ever level in 2018 and this calls for aggressive and pragmatic interventions to handle the situation.
She underscored that there was need to work harder to ensure broadening of tax base and public compliance with tax regime. Among others this requires careful understanding of tax policy issues as currently the tax system remains narrow, dependent on indirect taxes with income tax barely being collected from 1.4 million people.
While fiscal decentralisation has been a good move, it has complicated resource and expenditure management and calls for adoption of more coordination and coherent policies to limit distortions and negative impact. She said sales tax on services is one example where harmonised structure would be beneficial.
She encouraged PSX to develop a capital market road map as it has huge potential to contribute to domestic resource mobilisation by enhancing the breadth and depth of debt and equity markets. A vibrant stock market is critical to enhance investor confidence too to bring in more foreign flows, she stated.
Underscoring the strong economic potential, she encouraged businesses to reflect on how to strategise industrial diversification and generate surpluses for enhancing export capacities which is critical for stabilising the external account that often faces vulnerabilities and threatens macroeconomic stability and impacts its growth path.
She acknowledged the role of PSX in economic development by mobilising savings for investment which in turn help yield higher growth in all sectors of the economy.
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