LAHORE: The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has stressed the need for serious structural reforms with a keen focus on value-addition for a sustainable economic growth.
FPCCI President Mian Anjum Nisar in a statement suggested the government to raise exports to double digit of the GDP till the end of its term, as Pakistan’s exports have bounced back after witnessing decline in last four months. Country’s exports have fetched $1.99 billion in July 2020, witnessing 5.8 percent growth in dollar terms.
He said that consistent borrowing by developing economies to shore up its reserves in desperate times is only to lead towards a debt trap. He said that borrowing from friendly countries should only be seen as a short-term solution to prevent reserves depletion and consequent further depreciation of the currency.
Mian Anjum Nisar stressed that focus should be on promoting exports and restricting imports alongside making domestic industry more competitive and subsequently expand its export market.
The exports of goods and services are an injection into the circular flow of income leading to a rise in aggregate demand and an expansion of output, helping raise per capita incomes and reduce extreme poverty especially in developing economies like Pakistan, he said.
He said that world trade has not still come out of the dip in the wake of lingering corona pandemic, as exports of regional countries including India and Bangladesh registered a decline but Pakistan’s exports bounced back, reporting around 5 percent growth in July 2020 compared with regional players.
The exports went up in July 2020 after registering continued decline pre and post COVID-19 pandemic.
Regarding market diversification, Mian Anjum Nisar pointed out that not much progress has been shown in this regard, as the exports still seem to be heavily dependent on traditional export markets. He underlined the need for evaluating geographical diversification in order to re-align the focus towards new opportunities.
Mian Anjum Nisar observed that the World Bank, IMF and donor agencies should be considered as a stop-gap arrangement, which may have forced excessive devaluation, steep monetary tightening, cut in development and defence expenditures.
Loans simply serve to bridge the gap until the effects of the reforms take effects. The problem occurs if the country takes loans but fails to reform, he added.
He said the sustainable solution to Pakistan’s problems lies in the structural reforms, as we can see very large inefficiencies in tax collection. So, the tax compliance must be improved and tax base be broadened. This cannot be achieved with a single policy change, but by a systemic approach, he added.
The government preferred direct taxation to meet revenue shortfall as opposed to resorting to increasing indirect taxes because direct taxes tend to be more progressive in nature, therefore, the burden on the lower income strata of the population is lesser, he said.
He said that undertaking structural reforms require political will.
He said that the early signs from the government are positive and exhibit zero-tolerance against corruption. He said that enacting structural reforms, such as improvements in tax collection system, bureaucracy and ease of doing business requires major political will and strict implementation of policies, he added.
Copyright Business Recorder, 2020