Cre taker Finance Minister Dr. Shamshad Akthar visited Pakistan Stock Exchange (PSX) on Saturday, 14th July, 2018. The caretaker Minister for Finance was upbeat on Pakistan’s growth performance for 2018 as real GDP grew by 5.8%. This growth is the outcome of combination of factors which included good performance of both agriculture and industry. Notable has been the rise in contribution of services sector over the years to over 59% in GDP. Growth has been further driven by rising aggregate demand as consumption and investment remained strong.
Without mincing her words, she openly said that the built up of twin fiscal and external deficits have complicated effective macroeconomic management. Interim Government is taking steps within its limited mandate to push for stability, but has no intention to seek IMF financial assistance for the country. However, the current trends underscore significance of short term stabilization program. To ensure macroeconomic sustainability immediate steps are needs to by complimenting long term structural reforms. Interim Government is undertaking the necessary diagnostics of the situation and analysis which hopefully will serve as useful input for incoming Government to take appropriate decisions and steps.
The caretaker minister emphasized that country needs extensive economic policy and institutional reforms to ensure growth and stabilization are well sequenced. The two key priorities, critical for long term stability and development for Pakistan are: domestic resource mobilization and a strong export diversification drive which will help resolve country’s domestic and external vulnerabilities in most effective manner.
Pakistan just can’t afford to deploy its foreign exchange reserves regularly to finance imports. She reiterated that imports may need of the time, but there is an urgent need to boost export revenues. Pakistan’s immediate challenge remains the external current account deficit that in 2018 reached its highest ever level. This requires immediate but aggressive and pragmatic interventions to overcome the situation.
She underscored that every citizen need to work harder to ensure broadening of tax base and public compliance with tax regime. Among others this requires careful understanding of tax policy issues as currently country’s tax system remains narrow, dependent on indirect taxes with income tax barely being collected from 1.4 million people. While fiscal decentralization has been a good move, it has also complicated resource and expenditure management and calls for adoption of more coordinated and coherent policies to limit distortions and negative impact. Along with sales tax on services is one example where harmonized structure would be beneficial.
Dr. Shamshad, encouraged efforts of PSX to develop a capital market road map as the country enjoys huge potential to contribute to domestic resource mobilization by enhancing the breadth and depth of debt and equity markets. Among others, a vibrant stock market is critical to enhance investors’ confidence too pave way for the inflow of sustained inflow of foreign exchange.
Underscoring country’s strong economic potential she encouraged businesses to reflect on how to strategize industrial diversification and generate surpluses for enhancing export capacities which is critical for stabilizing the country’s external account that often faces vulnerabilities and threatens country’s macroeconomic stability and impacts its growth path.
She acknowledged the role of Pakistan Stock Exchange in economic development by mobilizing savings for investment which in turn help in yielding higher growth in all sectors of the economy.