ISLAMABAD: In the face of ongoing economic challenges in Pakistan, the United Nations Economic and Social Survey of Asia and Pacific (UNESCAP) 2024 report has projected the country’s gross domestic product (GDP) growth to remain stagnant at 2 per cent, with inflation soaring to 26 per cent, in the current fiscal year (FY), as reported by The News.
The UN report suggests a slight uptick in Gross Domestic Product (GDP) growth to 2.3 per cent in the coming FY, while projecting inflation to decrease to around 12.2 per cent.
Concerning the country’s tax gap, the report highlights its current standing at approximately 3 per cent of the GDP, potentially escalating to over 12 per cent compared to the existing tax-to-GDP ratio of the Federal Bureau of Revenue (FBR), given the Rs9415 billion tax collection target for the current FY, which accounts for about 9 per cent of the GDP.
The media reports indicate that the UNESCAP underscores that while tax levels in countries like Pakistan, Bangladesh, and Sri Lanka are relatively low, their tax gaps, measured as a share of current tax revenues rather than GDP, are not insignificant.
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The report underscores the need for significant increases in tax revenue, alongside improvements in socioeconomic development and public governance, as solely enhancing tax policies and administration may not suffice to bridge the substantial development financing gaps in low-tax countries.
Highlighting the economic challenges faced by Islamabad, the UN forum points out the adverse impact of political unrest on businesses, compounded by floods disrupting agricultural production.
Both Pakistan and Sri Lanka have turned to the International Monetary Fund (IMF) for external assistance, with Pakistan securing a deal with the IMF in mid-2023, paving the way for further assistance from bilateral partners such as China, Saudi Arabia, and the United Arab Emirates.
Meanwhile, despite experiencing economic contraction in recent years, Sri Lanka has witnessed some macroeconomic stability under the IMF program, with Islamabad and Colombo both implementing fiscal adjustments to restore fiscal sustainability. These measures include the removal of subsidies for the power sector in Pakistan and domestic debt restructuring in Sri Lanka.
