In its latest report on the state of economy, the State Bank of Pakistan has projected the growth rate between five and six percent for 2017-18 in the country’s gross domestic product which is almost the same growth target already set by the government. However, the ambitious target of six percent is achievable in the light of improvement in agriculture, services and industrial sectors.The bank has lowered its inflation target up to 5.5 percent from its earlier projection of 6 percent. The trade deficit is growing and the report advocates for containing the imports of unnecessary and luxury items. The import of only capital goods and essential raw materials should be allowed to save foreign exchange and strengthen recovery as well as investment.There is 19.1 percent growth in import bill covering oil and consumer goods. However, the growth is compatible with increase in income levels and rising share of consumption in overall GDP which increased to 94 percent during the last fiscal year. The economists, however, believe the bank has ignored the vital factors such as increase in oil prices at international market, shrinking foreign exchange reserves of the country and pressures on the currency.
Expecting that inflation will be contained below the target of 6 percent, the bank maintained the interest rate at 5.75 percent for the next couple of months.The report has also highlighted four major challenges faced by the economy, including reduction in the current account deficit, alleviation of credit constraints for small and medium-sized enterprises and lack of will to create fiscal space to fund infrastructure and social development projects.The experts believe there is pressure on the economy from hike in commodity prices and lack of foreign direct investment.
According to the report, the tax-to-GDP ratio has declined to 12.5 percent after rising consistently to 12.6 percent in 2015-16 from the low of 9.3pc in 2009-10. The ratio was significantly lower in 2016-17 as compared to the yearly target of 12.9 percent. The growth in the tax collection also fell below 9.5 percent in nominal GDP while expenditures jumped up to 17.3 percent of the GDP in one year.There is a need to assess and analyze the reports of the State Bank and the international financial institutions to devise better policies. Unfortunately, the government takes the reports as a routine matter. Reduction in tax ratio is a serious issue and none other but the government itself is responsible for it. People generally want to pay taxes, but do not want to involve themselves in official intricacies where corruption is the order of the day.