Chairman of the government's Advisory Panel of Economists, Dr Hafiz Pasha, says Pakistan is a 'war economy' citing that the agenda for economic management 'is not of normalcy'.
In a presentation titled 'Outlook of Pakistan Economy' organised by National Fullerton Asset Management Limited on Saturday, Pasha said although state of war hasn't permeated into businesses yet, the country is sacrificing growth every year.
"The cost of terrorism comes to around Rs 700 billion or roughly 5 percent of the GDP," said Pasha, adding that the costs are in excess of aid, including the US aid through Kerry-Lugar Bill. Highlighting the hazards on external front, Pasha said that, in case foreign inflows in the form of Kerry-Lugar Bill and FoDP pledges do not materialise, Pakistan will have to make adjustments in the import bill.
"In the next five years cumulative current account gap will be around $45 billion and the Kerry-Lugar Bill and FoDP will cover 30 percent of it," he said.
He said rising portfolio inflows amid marginal growth in LSM is a wonderful signal, but the decline in private sector off take and stagnant tax revenues makes the "recovery process fragile". "Downside risks are overwhelming us.......don't see growth rate in excess of population rate" he said, adding that if governance improves and if security problems are resolved we can go back to growth rate of 5 to 6 percent.
"Unless security problems are resolved, the economy will take a backseat", he said while emphasising the need to manage external balances. "If security issues are resolved privatisation will start again", adding that the way to preserve stability is to mange balance of payments. "We are far too dependent on imports... our imports are twice the exports and we should have regulatory duties on non-essential imports", he said.
Pasha who also chairs FBR's Tax Advisory Council said, "Moving to direct tax is imperative in a war economy", adding that everyone must contribute in taxation - including the agriculture sector.
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