Pakistan economy despite being the government tall claims and high GDP growth is facing severe challenges.
Declining exports and low tax collection emerged as the main challenges to fiscal and current account balances, according to the State Bank of Pakistan (SBP).
Released on Friday, the SBP’s third quarterly report on the state of the economy said the recent fiscal incentives appeared to be counterproductive as they led to deceleration in tax collection.
“Low tax collection is another challenge faced by the economy. Recent fiscal incentives for investment, exports and domestic production have led to a deceleration in tax collection.
While the importance of such fiscal relief measures to support growth cannot be overemphasised, concerted efforts are required to further improve efficiency of the tax system,” said the SBP report.
Both the challenges – decline in exports and below-target tax collection – are impacting two key macroeconomic balances ie current account and fiscal.
In order to maintain the growth momentum and hard-earned economic stabilisation, these balances need to be kept at sustainable levels, the report said. The fiscal deficit stood at 3.9 per cent of GDP in Jul-Mar compared with 3.5pc in the corresponding period last year.