24 October 2016 update: Christine Lagarde, Managing Director of IMF, congratulated PM Sharif on successfully completing the IMF programme, saying the completion reflected positively on the country and viewed as a symbol of credibility and stability.
“It is a fantastic step in your journey that you have achieved a better and solid economic position in a brief period of two years.” the IMF chief told the PM.
Lagarde lauded the PM for steering the country out of multiple challenges and achieving macroeconomic stability in a short period of time.
“Pakistan is now in a better fiscal position and certainly out of economic crisis,” she said, according to PMO.
Lagarde said Pakistan’s economic growth had gradually increased, fiscal deficit had reduced while inflation had continuously declined in the country.
Pakistan GDP is set to grow by 5.3 percent in 2020, according to an IMF growth forecast for Pakistan, published in Bloomberg this year.
The forecast shows a consistently rising trend until 2020 when it plateaus.
This immediate forecast is in line with other medium-term forecasts by Harvard’s CID (up to year 2024), as published on this blog, BMI Research UK (by year 2025) and World Economic Forum (video), Switzerland.
In the longer term, several forecasts by Goldman Sachs, PwC and HSBC rank Pakistan as one of the top 20 economies in the world by 2050.
These forecasts are mentioned in Wali on The Pakistan 2050 Opportunity, published in The News, Pakistan’s largest-selling daily on 14 August 2016, and a live TV show I did earlier on Business Plus this year.
However, one worry. Pakistan tax-to-GDP ratio (a mere 10.1 percent) is among the bottom 15 of 100+ economies.
According to Bloomberg, although about 360,000 Pakistanis registered as new tax-filers since 2013 when Nawaz Sharif took over, the total is still only 1.1 million, or less than 1 percent of the population. IMF insists that this indicator needs to improve.
The government is aiming to achieve 12.2 percent tax-to-GDP ratio and 1.8 million tax returns in current fiscal year 2016-17.
Another worry is missed growth targets.
Update in October 2016: IMF has revised down the forecast of the global economy growth in 2016. It will slow to 3.08 percent from 3.2 percent in 2015. How will this global slowdown affect Pakistan’s growth?
In another report, Bloomberg highlights Pakistan’s missed targets of GDP growth over the past 10 years.
My suggestion for Finance Minister Ishaq Dar would be that instead of trying to fix all issues at once – which could a daunting task in this current inefficient system – his team could run various simulations based on our high-performing sectors. The sectors which have demonstrated growth in these three years and are promising need to be further developed.
Pakistan doesn’t to fix all issues in order to become a hyper-performing economy. It just needs to focus on sectors where more value can be achieved – nearly effortlessly – in the short term and a point or two could be added to GDP growth. Analytics and trends data could be handy for Minister Dar and his finance team.
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