According to newspaper reports, State Bank of Pakistan Governor Tariq Bajwa has told the National Assembly Standing Committee on Finance and Revenue about serious challenges confronted by the national economy, including external financing gap of around $12 billion during the current fiscal year. The governor explained the reasons behind devaluation of the Pakistani rupee and possible challenges to the national economy in the near future. As a matter of fact, the government and the central bank officials are reluctant to share information with general public on the deteriorating financial situation of the country. Experts believe the government had probably only one option to deal with overwhelming financing gap and to stop the foreign exchange reserves fall below $14.6 billion. The government, which was thumping its chest on floatation of international bonds, suddenly came under pressure and had to lower its currency value. Keeping in view the current situation, the governor ruled out any possibility to float another sovereign bond in the international market. The government is likely to seek further loans from the donor agencies without adopting any austerity measures or streamlining the financial affairs of the country. If short-term loans are small menace, the long-terms loans are big misadventure and this aspect should also be kept in mind before seeking foreign loans.
In the event of the US threats and Indian hegemonic designs, threats to the national security as well as economy have been multiplied in recent months. The nation is expecting general elections next year and sudden change of political spectrum in the country has left bad effects on every sphere of the economy. In a situation where the political elite is habitual of stashing its money in foreign banks, how the foreign investors can be persuaded to invest in this country. The gross external financial requirements have already reached over $20 billion during the current fiscal year. Out of $20 billion liabilities, the government has only around $8 billion, causing a financial gap of $12 billion.
Keeping in view the situation on the ground, experts believe the government will have to introduce structural reform in the tax collection system which is, currently, outdated and obsolete. The tax rates are high but tax net is limited and tax to GDP ratio is the lowest in the region. The tax collection system also needs to be simplified and instead of introducing tax amnesty schemes, the government should overhaul the tax collection system and curtail the powers of the collection and assessment agents. The government will have to allay fears of the business community if it wants them to come into the tax net.
