The document outlines the current state of Pakistan's economy and the need for economic reforms to support long-term growth and stability. Key issues identified include a difficult business environment, narrow tax base, inadequate public spending, and inefficient state-owned enterprises. It emphasizes the importance of fiscal reforms, trade competitiveness, social development, and governance restructuring to achieve sustainable economic and social progress.

1. STATE OF THE PAKISTAN ECONOMY AND
AGENDA FOR ECONOMIC REFORMS
Dr Vaqar Ahmed
National Defense University
November 11, 2024

2. CONTENTS
I. Current economic landscape
II. Key economic sectors
III. Structural issues
IV. Agenda for economic reforms
V. Social, inclusive, and climate smart growth
VI. Governance and institutional strengthening
VII. Conclusion

3. A PERSONAL JOURNEY
As an economist I was advising Pakistan's federal and provincial governments during
the multiple waves of COVID-19
Using real time data and evidence we were employing strategies to safeguard food
systems, revive small businesses, and steer fiscal responses.
We witnessed unprecedented collaboration between government, civil society, and
the military to overcome challenges
Since then, my research has focused on how to sustain the "emergency mindset"
beyond the pandemic - accelerating reforms and achieving long-term socio-economic
goals.

4. CURRENT ECONOMIC LANDSCAPE

5. STATE OF ECONOMIC GROWTH
• Why is economic growth low?
• What about our peers?
• What about the region?
Source: SBP 2024

6. RETURN OF ECONOMIC STABILITY
Pakistan has adhered to the IMF Stand-by Arrangement (SBA) to restore economic
stability
The economy has experienced a growth rebound of 2.4% in FY24, primarily driven
by the agriculture sector
Tight fiscal and monetary policies have reduced inflation
A contained current account deficit and a stable foreign exchange market have
allowed for the rebuilding of reserve buffers
The State Bank of Pakistan has reduced the policy rate
The FY25 budget maintains fiscal discipline, further supporting economic stability.

7. FY 2025
PROJECTIONS

8. KEY ECONOMIC SECTORS

9. MANUFACTURING INDUSTRIES
• Why is economic growth low?
• What about our peers?
• What about the region?
Production of Large Scale Manufacturing Industries

10. SBP GROSS FOREX RESERVES (US$)
• High borrowing
• Trade balance
• External shocks

11. STRUCTURAL ISSUES

12. STRUCTURAL WEAKNESSES
i. A difficult business environment, weak governance, and a large state role hinder
investment, limiting economic growth
ii. A narrow tax base limits government revenue, hindering public spending on social
and development needs
iii. Inadequate spending on health and education perpetuates poverty
iv. Limited infrastructure investment hinders economic potential and leaves Pakistan
vulnerable to climate change
v. Inefficient state-owned enterprises (SOEs), low quality of public investment, and
public service delivery undermine economic growth.

13. AGENDA FOR ECONOMIC REFORMS
I. Fiscal reform
II. Trade competitiveness reform
III. Policy coherence and coordination

14. A. FISCAL REFORM

15. TAX REFORMS
I. Broadening the tax base to include informal sectors
II. Improving tax administration and collection efficiency
III. Rationalizing tax exemptions and incentives
IV. Strengthening tax compliance through digitalization.

16. PUBLIC EXPENDITURE REFORMS
I. Prioritizing public spending on social sectors and infrastructure
II. Improving public financial management systems
III. Enhancing the efficiency and effectiveness of public expenditure
IV. Reducing non-developmental expenditures

17. PUBLIC DEBT MANAGEMENT
I. Reducing reliance on short term debt
II. Ratings to raise international debt on favourable terms
III. Provincial debt management is also important
IV. Strengthening debt sustainability analysis

18. IMPROVING PUBLIC FINANCE MANAGEMENT
I. Enforce fiscal responsibility laws
II. Build capacity of public finance officials and establish strong fiscal institutions
III. Implement IFMIS, TSA, and effective cash management practices
IV. Implement strong internal controls, external audits, and anti-corruption measures.

19. B. TRADE COMPETITIVENESS REFORM
I. Agriculture, industrial, and services sector’s development
II. Trade facilitation

20. AGRICULTURE SECTOR
I. Invest in research and development to improve crop yields and quality
II. Promote modern agricultural techniques and technologies
III. Improve water management and irrigation systems
IV. Strengthen agricultural extension services
V. Support smallholder farmers through credit, insurance, and market access

21. INDUSTRIAL SECTOR
I. Improve energy supply chain
II. Promote innovation and technology adoption
III. Improve the business environment, including regulatory reforms
IV. Develop skilled labor force through vocational training and education
V. Encourage foreign direct investment

22. SERVICES SECTOR DEVELOPMENT
I. Promote IT and IT-enabled services
II. Improve financial services and insurance sectors
III. Enhance business process outsourcing and online services
IV. Develop economical health and education tourism

23. TRADE FACILITATION
I. Reduce tariffs and non-tariff barriers to trade
II. Streamline customs procedures and reduce red tape
III. Negotiate bilateral and multilateral trade agreements
IV. Improve trade infrastructure, including ports and logistics
V. Remember trading with neighbors is a low hanging fruit!

24. C. POLICY COHERENCE & COORDINATION
I. Ensure consistency between trade, agricultural, industrial, and services sector
policies
II. Coordinate efforts of different government agencies
III. Establish strong public-private partnerships
IV. Create a stable and predictable policy environment

25. SOCIALLY RESPONSIBLE GROWTH

26. PRIORITIZE SOCIAL DEVELOPMENT
I. Ensure quality education for all, especially girls, to develop a skilled workforce
II. Improve healthcare access and affordability to reduce poverty and inequality
III. Implement effective social safety nets to protect vulnerable populations

27. INCLUSIVE OPPORTUNITIES
I. Support startups, SMEs through financing, training, and market access
II. Invest in rural infrastructure, agriculture, and value-added industries
III. Empower women through education, employment, and entrepreneurship.

28. ENVIRONMENTAL SUSTAINABILITY
I. Promote sustainable practices in agriculture, industry, and energy
II. Invest in renewable energy and climate-resilient infrastructure
III. Enforce environmental regulations and promote conservation

29. GOVERNANCE AND INSTITUTIONAL STRENGTHENING
I. Enforce public and private contracts
II. Strengthen civil service supporting economic reforms
III. Utilize technology to improve efficiency and transparency in public services

30. CONCLUSION
Pakistan's position as the fifth-largest population presents a significant opportunity to
meet domestic demand through entrepreneurship
The government is supporting startups via incubators and funding initiatives
Vocational training programs are also strengthening workforce skills, opening doors in
both traditional and emerging industries
Emerging urban centers with growing potential, a youthful, literate, English-speaking
workforce, and a tech-savvy, connected youth population are key strengths
Pakistan's economic alignment with major global players, including China, the Middle
East, the EU, and the US, presents vast opportunities for trade, investment, and
geopolitical collaboration.

31. THANKS!