Background
Pakistan is currently pursuing its 24th IMF bailout package to facilitate long-term reforms. The agreement aims to unlock USD 1.1 billion from the IMF’s USD 3 billion standby arrangement from the previous year. Reforms will primarily target fiscal consolidation, energy sector viability, inflation, and private sector-led economic activity. The 65th Tabadlab Policy Roundtable unpacked the implications of this programme for Pakistani citizens.
Featured Panelists
Hadia Majid
Hadia Majid is an Associate Professor and Economics Department Chair at LUMS.
Tobias Haque
Tobias Haque is the Lead Country Economist for Pakistan at The World Bank.
Sobia Khurram
Sobia Khurram is a Professor at the Institute of Administrative Sciences at the University of Punjab.
Shahrukh Wani
Shahrukh Wani is an Economist at the International Growth Centre and has experience working in Afghanistan, Pakistan, Uganda, and Zambia.
Khurram Husain
Khurram Husain is a Business and Economy Journalist and writes regularly for Dawn.
Discussion Summary
Tax Reform and Fiscal Consolidation
Pakistan’s persistent failure to reform its tax base and power sector has emerged as a significant hurdle in negotiations with the IMF. The complexity of the tax system, coupled with distortionary exemptions, undermines its capacity to generate revenue. Addressing these structural deficiencies is important to ensure economic growth and stability. A unified tax system with minimal exemptions could broaden the tax base and improve revenue collection. Moreover, leveraging data-driven approaches, as exemplified by Kenya, India, and Ghana, can improve transparency and enforcement capacity in tax administration, and ensure accountability.
Governance and Policy Implementation
The efficacy of Pakistan’s reform efforts hinges on effective governance and policy implementation. The lack of consensus and unity within the government impedes the execution of reform policies and undermines its credibility. Strengthening collaboration among government agencies and stakeholders is essential to drive greater support for reform. Moreover, aligning IMF programmes with the broader government agenda, and ensuring accountability in policy execution, is critical for achieving outcomes and restoring investor confidence.
Structural Sector Reforms and Economic Competitiveness
Pakistan’s economic challenges are deeply rooted in structural deficiencies. This demands comprehensive reforms to improve productivity and market competitiveness. The complexity of the tax system and reliance on indirect taxes inhibit economic growth and investment. Addressing rent-seeking behaviour among the business elite and promoting inclusive growth is imperative for unlocking Pakistan’s economic potential. As with successful reform trajectories in countries like India, South Korea, and Malaysia, targeted reforms in key sectors such as manufacturing, textiles, and agriculture can drive economic transformation and job creation.
Social Protection and Inclusive Growth
Alongside efforts to reform the economy for greater fiscal sustainability, it is equally necessary to safeguard the welfare of vulnerable and marginalised groups. Pakistan’s regressive fiscal system exacerbates income inequality and social disparities. Introducing targeted social protection measures and expanding the tax base through direct taxation can improve revenue generation while ensuring a more equitable distribution of the tax burden. Moreover, investing in human capital development and inclusive growth initiatives can mitigate the adverse impact of reforms on vulnerable communities and promote inclusive economic development.
