LAHORE: Tax incentives and steady increase in development spending helped boost economic activities, this was stated by State Bank of Pakistan in a report on the State of Pakistan’s Economy for the fiscal year 2016-17 on Thursday.
However, the report says that the fiscal deficit increased to 5.8 percent of GDP in FY17 compared to 4.6 percent in FY16. Though inflation trended upward, it continued to be well anchored and remained lower than the target for the third consecutive year in FY17. The average CPI inflation rose to 4.2 percent during FY17 after falling to 2.9 percent in FY16.
The report also highlights the main challenges that need to be addressed to sustain the current pace of expansion in the economy while keeping inflation low and stable going forward. It particularly emphasizes on containing unnecessary imports and expanding export base in order to keep current account deficit at manageable level.
Moreover, to maintain the current pace of spending on infrastructure and social development projects, the growth in revenue collection needs to be accelerated.
This can be achieved by deepening the reforms initiated at federal level and stepping up efforts by provinces to enhance their own tax collection. The Report also suggests further improvement in business conditions to strengthen recovery in investment and thus help switch away from current consumption led to investment-cum-export oriented growth.
