The International Monetary Fund has called on Pakistan to move beyond macroeconomic stabilisation and undertake deeper structural reforms, including provincial tax mobilisation, governance improvements, energy sector restructuring and reduction in business costs.
The call was made by the IMF’s resident representative in Pakistan, Dr Mahir Binici. He was speaking at the closing plenary of the 29th Sustainable Development Conference, organised by the Sustainable Development Policy Institute, known as SDPI, in Islamabad on Thursday.
The closing plenary was titled Where Reforms Matter the Most for Growth. The session formed part of the concluding ceremony of the conference, and it was the setting in which Dr Binici set out the IMF’s view on the next stage of reform.
The conference was organised by the Ministry of Finance, and the SDPI event brought together participants to discuss the direction of policy. The closing plenary provided the platform for the IMF representative’s remarks on reform priorities.
Dr Binici’s message was that stabilisation, while important, is not sufficient on its own. He called for the country to move beyond macroeconomic stabilisation towards deeper structural reforms, a shift that would address the underlying features of the economy rather than only its short-term stability.
Provincial tax mobilisation was named among the reforms he called for. That area concerns the raising of revenue by the provinces, and its inclusion points to the role of provincial taxation in the wider reform agenda.
Governance improvements were also named. Energy sector restructuring was listed as a further priority, alongside a reduction in business costs. Together, the four areas — provincial tax mobilisation, governance, energy restructuring and lower business costs — form the core of the deeper reforms urged by the IMF representative.
The IMF called for a broader, simpler, fairer and more predictable taxation system. That system, in the IMF’s view, is needed to generate resources for human capital development, infrastructure and investment, linking the design of the tax system directly to the funding of development priorities.
A broader tax system would reach more of the economy, a simpler system would be easier to administer and comply with, a fairer system would distribute the burden more evenly, and a more predictable system would give taxpayers greater certainty. Those four qualities were the ones the IMF emphasised in its call.
Dr Binici said IMF research showed that emerging developing economies like Pakistan need revenue of at least around fifteen percent of GDP to have a strong, well-functioning state. That level of revenue, in the research cited, is the threshold for a state that can provide services and enable better living standards.
The figure of around fifteen percent of GDP is presented as the revenue level required for the state to function strongly and to deliver services. The link made by Dr Binici is between the amount of revenue raised and the ability of the state to provide services and support better living standards for its people.
He praised Pakistan’s efforts to maintain economic stability amid recent global and domestic challenges. That praise acknowledges the work done to keep the economy stable in difficult circumstances, both internationally and at home.
At the same time, he stressed the need for deeper and broader reforms for sustainable growth. The emphasis on depth and breadth suggests that the reforms required go further than those already undertaken, and that they need to cover more areas of the economy.
The contrast in his remarks is between stabilisation already achieved and the structural change still required. Stability, he indicated, has been maintained, but sustainable growth will require reforms that are deeper and broader than stabilisation alone.
The conference setting, the 29th Sustainable Development Conference organised by SDPI in Islamabad, provided the context for the remarks. The closing plenary, with its title Where Reforms Matter the Most for Growth, framed the discussion around the question of which reforms matter most for growth.
The IMF’s call, as delivered by Dr Binici, therefore covers both the direction and the content of reform. The direction is from stabilisation towards structural change, and the content includes provincial tax mobilisation, governance improvements, energy sector restructuring, lower business costs, and a taxation system that is broader, simpler, fairer and more predictable.
Source: Dawn, The Express Tribune
