Current Amendments in Economic Reforms of Pakistan

CURRENT AMENDMENTS IN ECONOMIC REFORMS

Submitted by:

Hamza Khalid

Faisal Danish

Murad Khan

Summary

The fiscal deficit is growing for the first time in three years, partially offset by remittances, CPEC and other financial flows Skills development could improve the employability of Pakistan’s growing youth population Pakistan’s agriculture sector presents enormous potential for growth through increased productivity Foreign savings are partially plugging the gap, China-Pakistan Economic Corridor (CPEC) will be crucial to Pakistan. Experts have welcomed an amendment to the Protection of Economic Reforms Act 1992 that will prohibit those who do not file tax returns from operating bank accounts in foreign currencies and making international financial transactions in such currencies.  The Federation of Pakistan Chamber of Commerce and Industry has welcomed the amendment in the Protection of Economic Reforms Act that restricts the non-filers from maintaining foreign currency accounts. Economic policies are underpinned by various experts Pakistan in the 1960s did not follow this strategy but had a mixed economy model in which the state set up the industries but then divested them to the private businesses.

Table of Contents

Contents

Summary        2

CURRENT AMENDMENTS IN ECONOMIC REFORMS IN PAKISTAN        5

COMPARISON OF PRIOR DATA (1947-2012)        6

IMPACT OF NEW ECONOMIC REFORMS ON THE ECONOMY OF PAKISTAN        7

Conclusions        8

References        9

INTRODUCTION

The report is about the Protection of economic reforms (amendment) Ordinance 2018 and about the changes made in the economic reforms ordinance. The amendment is in section 5 of ordinance of economic reforms act, where it is made mandatory that no cash shall be deposited in a foreign currency account of a resident citizen of Pakistan, unless the account holder is a filer as per income tax ordinance 2001. Filers is defined as the taxpayer whose name appears in active tax payer list from time to time or is holder of a tax payer card. The impact of the amendments on the economy of Pakistan and comparison of prior data is also mentioned in the report.

CURRENT AMENDMENTS IN ECONOMIC REFORMS IN PAKISTAN

The Federation of Pakistan Chamber of Commerce and Industry has welcomed the amendment in the Protection of Economic Reforms Act that restricts the non-filers from maintaining foreign currency accounts. Non-filers would not be able to conduct international transactions which will discourage illegal use of foreign currency accounts. The decision of the government will help curb flight of capital and conversion of the black money into white.

If we talk about CPEC Incentives being offered to the Chinese companies should also be made available to the local companies. Government to make the taxation business friendly and take necessary steps to improve the ease of doing business. The government must simplify the tax form, ensure timely payment of tax refunds and abolish withholding tax on bank transactions.

Tax deposits should be simplified, the trade deficit should be controlled which is associated with export promotions. Budget 2018-19 should bring liberal investment policies for infrastructure development, broadening tax base and creating jobs. As exports fell by 1.2 % and imports increased by 14% compared with FY16. Trade deficit is increasing which can be offset by remittances but due to deteriorating economic condition in GCC countries they declined. Now they are offset by CPEC and other financial programs.

He expressed grave concern over scarcity of water in Southern Punjab and said it would severely impact the agriculture sector. The government, therefore, must take necessary measures in the federal budget to redress this vital issue. Pakistan’s agriculture sector has lagged behind. It continues to be a crucially important sector in the economy, accounting for 21 percent of GDP, 44 percent of the labor force and 78 percent of the country’s export (directly and indirectly through food, textile, and leather) earnings in FY16. In recent years, however, the sector has underperformed, growing at less than 3 percent in each of the past five years. Limited water availability combined with low user charges and limited water storage creates significant water stress. Agricultural productivity is considerably low; as crop yields per hectare and per cubic meter of water are far lower than international benchmarks. These problems are not always eased by existing agricultural subsidies. Punjab’s vast wheat procurement system generates significant distortions, stimulating extra production of a crop that is already overstocked and discouraging diversification. The cost of the program is significant, with direct costs estimated at Rs. 35 billion a year.

He said the foreign assets were useless for Pakistan but now these could be brought into the country with payment of only five percent tax that would ultimately ensure huge financial benefits to Pakistan. These foreign remittances would be used for creation of new employment opportunities as well as expansion of local industry on modern lines. Despite robust growth in Punjab over the past decade, the province’s economy has struggled to create enough jobs for its growing youth population. Although the young in Punjab are better educated on average, they are more likely to be unemployed or informally employed than their older counterparts. A key constraint to productive employment is the lack of relevant skills. Conscious of this, the Punjab government is in the process of significantly expanding the Technical and Vocational Education and Training (TVET) ecosystem to deliver training on a large scale. After half a million individuals were trained in FY16, it is expected the government could well meet its target to train two million by 2018. This training is translating to labor market-relevant skills or better employment outcomes. Further policy efforts are therefore required to ensure that training meets minimum quality standards and is relevant to employers’ needs.