Youth employment: PIDE seminar urges need of over 8pc sustainable GDP growth

ISLAMABAD: Pakistan requires a sustainable GDP growth of more than eight percent for youth employment, to reduce the debt burden with an annual investment increase of 29 percent for the next 30 years.

This was the crux of a seminar organised by the Pakistan Institute of Development Economics (PIDE) in collaboration with the World Bank (WB) titled, “PIDE, WB Debate on Reform Priorities for Pakistan”, here on Friday.

The working-age population annually is increasing by four million in Pakistan, with the current labour force increase rate the country annually needs a minimum of eight per cent economic growth and with increased labour force participation, especially of females, higher growth is critical, the seminar was told.

They also opposed the existence of 122 regulatory bodies, saying that such a huge number of regulators have just wasted time and money. They said that implementation of rules is needed not permissions with digitalization.

They further underlined the need for fiscal consolidation instead of chasing taxes, saying the country in the past 75 years has chased taxes in 23 International Monetary Fund (IMF) programmes which failed to achieve the desired results.

Moreover, Pakistan’s tax system is cumbersome, distortionary and volatile which has created a huge uncertainty in the economy.

Government’s expenditures and balance sheets are always ignored, tax documentation is scary and costly as a result businesses do not corporatize in a bid to escape the burden of documentation and random tax changes. Therefore, the documentation should be made easy and simple as well as making taxation simple and stable.

A PIDE and WB joint event that brought together an array of stakeholders committed to shaping Pakistan’s economic endeavours aimed at designing support to the nation’s new economic development agenda over the next five years and beyond, was marked by rich discussions and a shared commitment to actionable reforms.

Speaking on the occasion Vice Chancellor (VC) PIDE Dr Nadeemul Haque explained a pivotal economic reform initiative titled, “ISLAAH: Immediate Reform Agenda - IMF and Beyond”.

He said the strategy emerges in response to Pakistan’s pressing need for substantial external financing, highlighted by an IMF report which necessitates over $120 billion in the next five years.

Dr Haque’s comprehensive reform agenda addresses crucial sectors including regulatory modernisation, tax reform, market liberalisation, energy efficiency, and enhancements in agriculture and banking. A key feature of the reforms is the introduction of a “Regulatory Guillotine” aimed at eliminating burdensome regulations that hinder business growth and innovation.

These reforms are designed to rejuvenate Pakistan’s economic landscape, facilitating a more business-friendly environment, optimizing export strategies, improving import regulations, and enhancing overall sectoral efficiencies. The goal is to catalyze investment, create jobs, and promote higher GDP growth, thus, steering Pakistan towards long-term economic stability and prosperity.

While talking on “Reforms for a Brighter Future: Time to Decide,” Mathew Verghis, Regional Director of the WB for South Asia stated that Pakistan’s economic model is unsustainable due to its reliance on borrowing to finance its fiscal and current account deficits, leading to a growing debt level, which has reached 80 percent of GDP.

He further added that Pakistan’s spending exceeds its revenue, and it imports more than it exports, resulting in increased domestic and external borrowing. However, he also noted that Pakistan has the potential for a brighter future, leveraging its youth, natural resources, and strategic location to achieve 7-8 per cent annual GDP growth, and emphasized the need to prioritise reforms addressing the current economic crisis.

Dr Durre Nayab, joint director PIDE talked about “Public Administration for the 21st Century”.

She addressed critical inefficiencies in Pakistan’s governance system, proposing comprehensive reforms across various sectors including the cabinet, civil bureaucracy, judiciary, and local government. She highlighted the necessity to reduce the size of the federal cabinet, limit political appointments, and emphasize expertise and performance in governance roles.

The reforms aim to professionalize and streamline public administration by eliminating outdated practices, introducing competitive hiring processes, digitalizing operations, and enabling greater autonomy at the local government level.

Additionally, the presentation called for the restructuring of ministries and autonomous agencies to enhance transparency, accountability, and effectiveness in public service delivery, thereby aligning with modern governance standards and promoting a more responsive and efficient administrative framework.

Derek HC Chen, senior economist at the World Bank outlined a comprehensive review of Pakistan's federal tax system, aiming to enable a modern and efficient tax structure.

Chen discussed the need for substantial reform due to Pakistan’s low revenue collection compared to international standards and the complexities within the current tax system marked by numerous special provisions and concessional rates. The review provided detailed analyses of specific taxes such as sales tax, personal income tax, and corporate income tax, revealing inefficiencies and the potential for broadening the tax base. Key recommendations included rationalising concessions, enhancing tax policy and administration, and leveraging potential revenue from provincial sources.

Dr Ahmad Waqar Qasim, senior research economist PIDE extensively critiqued the existing regulatory framework in Pakistan, highlighting it as a significant impediment to economic activity due to its complexity and the burdensome nature of obtaining permissions.

He identified the pervasive regulatory burden as an “invisible tax” that stifles economic initiatives across all sectors. The review underscored the necessity of a “Regulatory Guillotine” approach, which has been successful in various countries, to streamline regulations by eliminating unnecessary permissions and simplifying the process through digital governance. This approach is advocated as essential for fostering investment, enabling efficient markets, and reducing the bureaucratic inclination towards excessive control.

The presentation also called for the implementation of regular Regulatory Impact Analyses (RIA) to ensure new regulations are justified by clear cost-benefit analyses, thereby promoting transparency and accountability in regulatory practices.

Maliha Haider, education specialist at the World Bank, highlighted significant strides made in Pakistan’s educational system, including expanding access to free and compulsory education and introducing innovative reforms such as merit-based teacher recruitment and public-private partnerships.

Despite these efforts, Pakistan still faces substantial challenges, underscored by its low education spending relative to South Asia, which contributes to high dropout rates and learning poverty. The document “Spend Better, Spend More: How to Make Education Expenditure Count for Children in Pakistan” outlined a comprehensive reform agenda aimed at enhancing efficiency in public education expenditure to improve children’s learning outcomes.

It emphasised the need for increased spending to at least 4.3 per cent of GDP, improving spending efficiency, equity, management, coordination, and greater involvement of parents and civil society. The proposed reforms are designed to address systemic inefficiencies and are supported by evidence-based approaches that promise enduring benefits and a foundation for continuous improvement in the education sector.

Copyright Business Recorder, 2024