PIDE unveils comprehensive reform agenda for economic revival

ISLAMABAD, Apr 2 (APP): The Pakistan Institute of Development Economics (PIDE) has launched an ambitious reform strategy, “ISLAAH: Immediate Reform Agenda – IMF and Beyond,” to propel Pakistan towards economic stability and growth amid its looming financial crises. This initiative, embodying the ideals of rethink, reform, and revive, responds to Pakistan’s urgent need for external financing exceeding USD 120 billion over the next five years, as highlighted by the recent IMF Report, said a press release issued here on Tuesday.

PIDE’s strategy is a clarion call for a systemic overhaul to ensure economic progress and prosperity, moving beyond the narrow interests that often dominate the discourse on reform in Pakistan. Former Deputy Chairman of the Planning Commission and Vice Chancellor of the Pakistan Institute of Development Economics (PIDE), Dr. Nadeem ul Haque, emphasized the need for a comprehensive approach to address Pakistan’s economic challenges. The Pakistan Institute of Development Economics (PIDE) has outlined an agenda aimed at tackling key areas such as regulatory modernization, tax reform, market liberalization, energy sector efficiency, and improvements in agriculture and banking. A central component of this strategy is the implementation of a ‘Regulatory Guillotine’ to eliminate burdensome regulations hindering business growth and innovation.

The PIDE VC further added that the agenda outlines a series of innovative reforms designed to rejuvenate Pakistan’s economic landscape. These include debt restructuring and intensified cooperation with the IMF, comprehensive tax reforms for a more business-friendly environment, and strategic opening of the economy to prioritize exports and modernize import regulations, he said. Additionally, it addresses energy sector inefficiencies, agricultural and banking sector improvements, and the development of real estate and capital markets to encourage investment and deepen capital market participation, he said. The anticipated impacts of these reforms are substantial, promising to catalyze investment, foster job creation, and facilitate higher GDP growth. Addressing the historical event, Dr. Ahmad Waqar Qasim, Dr. Afia Malik, and Dr. Mahmood Khalid Senior Research Economists of PIDE, also took part in presenting PIDE’s pioneering study. They stated that PIDE’s groundbreaking economic reform initiative aims to streamline governance by addressing the burden of 122 regulatory bodies operating directly under the Federal Government, which currently account for over 50% of the GDP, as revealed by PIDE’s Sludge Audits.

In our pursuit of economic efficiency, it’s imperative to shift from a system of permissions to clear rules, as permissions not only consume valuable time and resources but also incur significant documentation costs, both directly and in terms of missed opportunities. To achieve this, we must prioritize clear rules, digitization, and market liberalization, putting an end to the bureaucratic penchant for permissions and paperwork, thereby overcoming the ‘Permissionistan’ syndrome. Drawing inspiration from India’s successful reforms in 1991, it’s evident that piecemeal approaches won’t suffice.

Instead, we advocate for the implementation of a regulatory guillotine, a proven strategy adopted by countries like Hungary, Mexico, South Korea, and the UAE, among others. Nadeem ul Haque further stated that amidst the urgent need for tax simplification and policy certainty, this budget season demands immediate attention towards streamlining taxes in a revenue-neutral manner and ensuring stability for a decade, with a commitment to refrain from introducing new taxes in each budget cycle. He said the adverse effects of tax uncertainty and instability, as highlighted by the PIDE State of Commerce Report, cannot be overstated, as they have driven investments underground, hindered firm growth, and impeded corporatization and listing.

In addressing the income tax regime, we advocate for a uniform tax rate across all sources of income, with provisions for agriculture income losses carry-forward and adjustment, along with the elimination of the presumptive tax regime and taxes on turnover, he said. Furthermore, we call for uniformity in taxation for AOPs,sole proprietors, and corporations, alongside reforms in inter-corporate dividend income and asset sales taxation. Nadeem said that transitioning from withholding taxes to Advance Income Tax mechanisms is also essential.

He said harmonizing the sales tax system across goods and services, expediting the implementation of POS through outsourcing within six months, and transitioning to a VAT mode with consistent rates are imperative steps forward. Additionally, excise duties should be increased on products detrimental to health and the environment, such as tobacco and beverages, to promote public well-being and sustainability.