PIDE study advocates a growth-orientated focus to ensure sustainability.
The Pakistan Institute of Development Economics (PIDE), in its recent research study, has highlighted the importance of focusing on growth with special focus on investment, productivity, and exports.
According to the ‘One Year Growth Strategy for Pakistan’ launched to mark the country’s 75th anniversary of independence, it says that historically the country had been focusing on taxation, not on growth.
“We have to shift the focus on growth; for that, we need to shine a light on investment, productivity, and exports,” the report says, adding that for this purpose there is a need to remove bottlenecks.
According to the report, Pakistan was having the lowest investment rate in neighbouring countries and the policy was totally focused on the tax rate and revenue collection, with no priority to investment and growth.
Pakistan’s debt-to-GDP ratio was another concern that has continuously been rising over the last decade.
There is a negative linear association between debt and economic growth regardless of the types of debt and the countries’ income levels.
Moreover, since 1965, Pakistan has approached the International Monetary Fund (IMF) twenty-two times; the recent engagement with the fund makes it the 23rd time, it adds.
The report terms problems in the energy sector as chronic that eight governments have not been able to resolve. Due to mismanagement and weak governance in the power sector, huge transmission and distribution losses occurred (Rs.473b during 2021, out of which Rs.402 was recovered through tariff and Rs.71b was added to circular debt).
PIDE report suggests a decentralised billing system at the DISCO level and the need to bring pre-paid meters to the market, which consumers will buy themselves.
This will create the possibility to minimise losses.
It also highlighted the importance of empowering the National Electric Power Regulatory Authority (NEPRA) to facilitate ‘wheeling’ at the marginal cost to make it attractive for sellers (generation companies) and buyers (bulk power consumers).
The PIDE’s research also suggests reforms in taxation for sustainable growth, adding there must be a mandatory tax filing and the need to abolish the distinction between filers and non-filers.
It also recommends introducing joint return filing instead of individual, and income tax should be universal and not segmented.
The division of income based on agriculture, dividends, and so on must be abolished. An integrated, fair-value, single VAT-based system of sales tax is the need of the hour.
Besides these four areas, the study suggests focusing on market spaces.
It proposes that Pakistan must grow at 7-9%, adding that the other crucial issues would settle through the spillover and the ripple effect of that much growth.
