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Pakistan economy Review and Recommendations. Pakistan ECONOMY: Key Stakeholders perspective CITIZENSINVESTORS MULTILATERAL AGENCIES (IMF/WORLD BANK etc.)

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Presentation on theme: "Pakistan economy Review and Recommendations. Pakistan ECONOMY: Key Stakeholders perspective CITIZENSINVESTORS MULTILATERAL AGENCIES (IMF/WORLD BANK etc.)"— Presentation transcript:

1 Pakistan economy Review and Recommendations

2 Pakistan ECONOMY: Key Stakeholders perspective CITIZENSINVESTORS MULTILATERAL AGENCIES (IMF/WORLD BANK etc.) Slide 2

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4 Lack of Employment Opportunities Crushing Inflation Source: State Bank of Pakistan * July-December * SBP projection Slide 4

5 Lack of Economic Justice:  Rich don’t pay fair share of taxes  Government not able to control cartel’s (mafias)  Poor and unequal access to services and opportunities (gas, electricity, education, health etc.) Slide 5

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7 Source: State Bank of Pakistan Slide 7

8 Caught in a debt trap and unable to survive without constant external support Source: State Bank of Pakistan Slide 8

9 Under taxed and poorly documented economy Source: State Bank of Pakistan Slide 9

10 Weak trade competitiveness:  Lowest regional trade integration in the world  Poorly educated, low skill workforce Source: Promoting Economic Cooperation in South Asia, World Bank, 2010 Slide 10

11 Source: State Bank of Pakistan Over and poorly regulated economy Large, highly inefficient, cash draining public sector Slide 11

12 The Investors Perspective

13 Private & Public Sector Borrowings The Investors Perspective: Out of control Public Spending Heavy borrowing by the government has resulted in classic crowding out effect on borrowing, reducing private investments & driving down private demand for credit. Source: State Bank of Pakistan * Feb, 2011 20.5% 20.9% 20.4% 17.3% 15% Slide 13

14 The Investors Perspective Badly deteriorated credit standing Pakistan's Credit Rating by Standard & Poor’s (S&P) Source: Bloomberg Slide 14

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16 On a war footing address the severe energy crisis by taking critical reform decisions which tackle pricing distortions, production and distribution inefficiencies, remove bottlenecks for urgently needed imports and develop the indigenous energy resources. Take urgent & concrete steps to sharply reduce public finance deficits. Overhaul the tax & tariff structure and bring all sectors into a uniform documented tax net. Reform and restructure public sector enterprises, starting with the transparent appointment of capable / professional top management and boards which are empowered to take the necessary actions. Eliminate waste in Govt. expenditure. Phase out broad based non targeted subsidies which unnecessarily benefit the well off also. Significantly increase education, health and income support expenditures (targeted subsidies) for the most vulnerable segments of the Society. Strengthen intra-regional trade linkages Slide 16

17 Expedite LNG imports Eliminate pricing distortions between different fuels / sectors created by GoP taxation / pricing decisions. Accelerate development of Thar Coal Revamp obsolete power generation / distribution / transmission facilities Deregulate the sector to bring in innovation and allow market to allocate molecules Accelerate gas exploration through political initiatives by settling high prospective zones in Baluchistan & KP - offer high incentives, which are consistent with global prices, for offshore drilling Slide 17

18 Same rate of tax regardless of source of income. Bring all exempted/severely under taxed sectors in the tax net Lower the tax rate and remove all exemptions. Document the Economy Revamp FBR. Deploy technology Carry out strategic review of tariff structure to create level playing field for local manufacturing Check abuse/misuse – Afghan Transit Trade/ under invoicing / smuggling * Exclusive of 7% levies (WWF, WPPF) Source: State Bank of Pakistan Slide 18

19 Reform and restructure public sector enterprises Create a "supra board" which overseas the restructuring program of all these PSE's Take these PSE's out of control of line ministries and have the "supra board" report to a parliamentary committee for restructuring. Appoint capable/professional top management and boards which are empowered and accountable. Mandate to reform and restructure these PSE's within two years. Focused and integrated deregulation of key sectors like energy and agricultural commodities Strengthen regulatory agencies (CCP, OGRA, NEPRA, SECP) by building capacity and ensuring independence. Slide 19

20 Reduce size of Govt. structure by eliminating ministries and subordinated institutions which add little or no value Introduce stronger parliamentary oversight over Govt. expenditure, including defense expenditure, by strengthening parliamentary committees Make Freedom of Information Act operational and provide citizens access to Govt. expenditure, particularly by using information technology Slide 20

21 Significantly enhance resources for education, health and social protection Instead of broad based subsidies use targeted income support programs Use innovative strategies to provide education and health coverage Enhance citizens engagement and oversight over public education and health programs Slide 21

22 5% Improvement by increasing Tax to GDP Ratio by 5% 2% Improvement by 10% Reduction in Expenditure 2% Improvement by elimination of PSEs Losses Total Improvement: 9% 3.3% Reduction in Fiscal Deficit 5.7% Increase in Education, Health and Income Support expenditure Slide 22

23 Revisit Afghan transit treaty to take care of Pakistani business concerns and address trade opportunities with Afghanistan and Central Asia Increase trade linkages with Iran with specific emphasis on energy Work for creation of a fully integrated South/Central/ West Asia energy grid Expand trade linkages with India Slide 23

24 India Nepal Bhutan Bangladesh Myanmar Iran Turkmenistan Uzbekistan Kyrgyzstan Tajikistan Sri Lanka Potential Energy Trade Flows All units in Mtoe Afghanistan Pakistan 18 45 17 21 3 1 3 3 7 29 34 1 Source: World Bank documents 1


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