LAHORE: Coordinator to Federal Tax Ombudsman (FTO) Meher Kashif Younis has emphasized the need for reforms to enhance market efficiency and address the economic challenges faced by emerging markets and developing economies.
Speaking at a seminar on “Reforms a key to growth” held under the aegis of Gold Ring Economic Forum, a strategic think tank, he said countries that enacted reforms saw their debt-to-GDP ratios fall by 3 percentage, on average, over a multi-year period, said a news release issued here.
He said market reforms can stabilise debt and foster growth in developing countries. He said the global economy has experienced multiple shocks in the past three years. Emerging markets and developing economies not only need to reignite growth and secure a full recovery, but they also must manage rising debt and other policy considerations, he added.
He said regulatory changes and other market reforms can ease this challenge, and a decline in a key measure of debt burdens takes place not only by increasing GDP but also by improving public finances through higher tax revenues and lower borrowing costs.
He said due to the large gap in how well markets function between advanced and developing economies, there is considerable scope for governments to use market reforms as a policy lever to revitalize growth and reduce debt burdens in developing economies. Meher Kashif Younis said by increasing competition or establishing appropriate regulatory frameworks, can boost economic output. He said improved market functioning not only lowers the debt ratio through the denominator effect but also strengthens fiscal outcomes and helps reduce new borrowing.
He said some reforms work better than others like the debt reduction associated with reforms is larger when governments are better at collecting taxes, have higher initial debt, and implement reforms during an economic expansion. Historically, developing countries have used some of the fiscal gains from reforms to fund other policy initiatives. Challenges from the political dynamics during the implementation period have also limited the fiscal gains. Spending carefully is a key factor for reforms to successfully reduce debt ratios, he added.
