Deficit gains mask a weakening economy

Express Tribune published a column by the chief executive of the think tank PRIME arguing that Pakistan's twin deficit is a symptom rather than the root cause of structural weakness. The writer says the deficit has fallen from 12.2% of GDP to 2.6% over the last decade, yet this has not produced sustained prosperity or stronger industrial productivity. The writer adds that demand-curbing steps have repeatedly sent real output into slumps whenever tax receipts rose modestly.

A central theme is the focus on numerical tax-to-GDP targets. According to the column, the FBR has crossed 10% of GDP, up from 8.3% two years earlier, but the writer views the drive as extractive and at the expense of growth. The writer also says the FBR acknowledged during the dialogue that higher revenue came at the cost of growth, with businesses reluctant to expand.

The column calls for structural reform, including transparent property valuation, noting that property tax yields 0.3% of GDP against a 0.6% benchmark and 1.0% potential. The writer notes more than 60 withholding taxes remain in place and urges integrating income tax and VAT bases. The column concludes that lower, broad-based rates and a level playing field would serve growth better than revenue-maximising targets.