ISLAMABAD: Pakistan must shift from the ‘trial and error’ approach to a long-term coherent, strategic economic plan. This involves managing fiscal deficits and debt while creating an environment that supports sustainable growth.
Talking to Media, Dr Hassan Dawood Butt, Senior Advisor at the Sustainable Policy Development Institute (SDPI) and CPEC former project director, emphasized the pressing need for strategic fiscal policies.
“Pakistan’s budgetary condition has deteriorated over the past three decades, and one factor contributing to this deterioration is the low level of national savings and investment, growing government debt, fluctuating currency rate, prolonged trade deficit, and inflation,” he said.
He argued that the time for experimenting with ad hoc measures was over now and the country could no longer afford a ‘trial and error’ approach to economic management. Pakistan’s fiscal space is severely limited, and the margin for error is virtually non-existent.
“To extricate itself from this quagmire, Pakistan must undertake a multipronged approach. Prioritizing substantial structural changes that aim to reduce the country’s reliance on foreign borrowing is paramount.
“By bolstering revenue generation through progressive taxation, curbing tax-evasion, and fostering a conducive business environment, Pakistan can gradually reduce its dependence on the IMF loans.
“The focus should be on structural reforms that encourage investment, improve productivity, and create jobs. Prioritizing government spending on essential public investments, such as the software industry, think tanks, human resources, education, and healthcare, is crucial,” Dr. Hassan said.
He said if significant structural reforms were not made and economic challenges were not taken seriously, the next crisis might be much bigger and far worse.
According to the Pakistan Economic Survey 2023- 24, during July-March FY2024, the fiscal deficit widened by 26.8 percent. It stood at 3.7 percent of GDP, the same as last year. The government fetched Rs3,408.6 billion from domestic sources and Rs493.8 billion from external sources to finance the deficit.
The total expenditure increased by 36.6 percent to Rs13,682.8 billion in July-March FY2024 from Rs10,016.9 billion in the same period last year. Within total expenditure, the current expenditure increased to Rs12,333.3 billion during July-March FY2024 from Rs9,244.6 billion in FY2023, showing a growth of 33.4 percent. –INP
