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Arab News
02-05-2025
- Business
- Arab News
Pakistan sees tax-to-GDP ratio hitting 10.6% by June as reform efforts continue
KARACHI: Pakistan's finance chief said on Friday the country's tax-to-GDP ratio was expected to reach 10.6% by the end of the current fiscal year, according to an official statement, as the government works to build on economic progress made under recent International Monetary Fund (IMF) loan programs. Pakistan's tax-to-GDP ratio, one of the lowest in the region, stood at around 8.8% in fiscal year 2023-24. Finance Minister Muhammad Aurangzeb has repeatedly warned that such low levels of revenue mobilization are unsustainable and pose long-term risks to fiscal stability. Aurangzeb shared the projection while briefing representatives of Standard & Poor's Global Ratings as part of Pakistan's ongoing sovereign ratings review. 'The Finance Minister presented a detailed overview of the government's macroeconomic reform agenda and reaffirmed Pakistan's commitment to achieving sustainable and inclusive economic growth by enhancing productivity and promoting exports,' the finance ministry said in a statement after the meeting. He said Pakistan's external portfolio was well-managed, with foreign exchange reserves projected to reach $14 billion by the end of June. 'He further stated that the tax-to-GDP ratio was expected to reach 10.6 percent by the end of June, which would mark progress toward the government's target of raising it to 13 percent by the conclusion of the 37-month Extended Fund Facility (EFF) with the International Monetary Fund (IMF),' the statement said. Pakistan has taken several steps to improve revenue collection, including the automation of processes at the Federal Board of Revenue (FBR), the operationalization of the National Tax Council and the imposition of agricultural income tax. It has also separated the Tax Policy Office from the FBR to better align tax policymaking with broader economic goals. Aurangzeb also highlighted recent surpluses in both the primary balance and the current account, along with falling inflation and current account deficit figures, which he said were contributing to improved economic fundamentals. During last month's IMF-World Bank Spring Meetings in Washington, the Pakistani finance chief held over 70 engagements with rating agencies, development finance institutions, investors and think tanks. The government also maintains the international community broadly supports Pakistan's reform agenda, as it tries to maintain its overall economic momentum.
Mint
02-05-2025
- Business
- Mint
India's economy will surpass IMF's projections for FY26, says finance secretary
New Delhi: India's economy will potentially grow at between 6.3% and 6.8% in 2025-26, likely settling near the midpoint of that range and surpassing the International Monetary Fund's (IMF) forecast of 6.2%, finance secretary Ajay Seth said on Friday. Seth, however, said India's public debt remained elevated and must be reduced through sustained fiscal consolidation. He was speaking at the annual growth conference hosted by Ashoka University's Isaac Centre for Public Policy on Friday. Seth's projection is in line with the Economic Survey's forecast earlier this year that India's economy would grow at between 6.3% and 6.8% in FY26. However, several multilateral agencies have cut their growth projections for the Indian economy. The International Monetary Fund last month cut its FY26 economic growth forecast for India to 6.2% from its earlier estimate of 6.5% due to potential trade risks as a result of the US' global tariff war. The US last month announced a 27% reciprocal tariff on Indian goods, citing India's average 52% duty on US imports, as part of a broader strategy to address trade imbalances and protect domestic industries. However, the US has temporarily reduced the tariff to 10%, providing relief to India and other trading partners. 'One must remain committed to fiscal consolidation for two key reasons,' Seth said, adding that elevated public debt was a major factor why credit rating agencies viewed India cautiously. '(They believe) our capacity to withstand another crisis on the scale of Covid-19 is limited at this point,' he said. Seth said India's interest payments as a proportion of tax revenue were relatively high as compared with that of countries like Indonesia, which holds a better credit rating. The Union government has criticized global credit rating agencies for undervaluing India's sovereign rating despite the country's strong growth, reforms, and macroeconomic stability. Despite India's consistent GDP growth, large foreign exchange reserves, a stable financial system, and political stability, India continues to receive a sovereign credit rating just above the investment grade, the Centre has argued. On the recently concluded IMF-World Bank Spring Meetings in Washington, Seth said there was growing consensus for a rebalancing within both the IMF and G-20 meetings, although there were divergent views on the mechanisms and leadership required for this shift. He added that uncertainty in the global economy due to the US tariffs was exacerbating existing challenges and, coupled with ongoing geopolitical tensions and economic disruptions, casting a shadow over global growth prospects. Seth emphasised that global economic policies should be recalibrated to achieve a balance that would address both short-term needs and long-term goals, fostering stability in a rapidly changing world. 'We have enough resilience to fight. We have to find our way. I am hopeful,' he said. Arvind Panagariya, chairman of the 16th Finance Commission, said India's per capita income must grow at 7.3% annually to reach $14,000 by 2047, a goal he believes is achievable. 'From 2003–04 to 2019–20, India clocked an impressive 9% average growth in real dollar terms. Even after factoring in Covid, India grew at 7.8% annually over 21 years,' he said at the event hosted by Ashoka University. 'India weathered three big shocks—the global financial crisis, Covid, and a banking collapse—and still grew steadily. Despite massive NPAs (non-performing assets, or bad loans) and an NBFC (non-banking financial companies) crisis, the Indian economy held its ground with strong momentum,' Panagariya added. First Published: 2 May 2025, 08:01 PM IST
IOL News
02-05-2025
- Business
- IOL News
G20 Summit: A Mountain to Climb for Africa
Ashraf Patel South Africa and Africa host the G20 under severe geopolitical and geoeconomic storms from trade wars to massive cuts in ODA from the US and EU. In this context, development finance, debt and, international tax policy intersect on a fraught vortex, one that needs resolution. From the UN Tax Convention and G20 Common Debt Frameworks and the IMF-World Bank Spring meetings, global policy elites, under severe pressure need to find ways to achieve resource mobilisation targets for the UN SDGs. As SA hosts the G20, the addition of the G20 Expert panel also adds urgency to the need for financial and development consensus. The UN's Seville Finance for Development Summit in June, held once a decade will provide the 'broad global consensus on Finance'. Will the G20 cohere or derail at a time when the geopolitics are fracturing at a velocity unseen in decades? The issue of the African debt crisis, Illicit financial flows, the UN Treaty and the G20 Common framework are key areas that will occupy finance ministers in finding consensus. The High-Level Panel Report on illicit financial flows from Africa (Mbeki Panel Report) and the High-Level Panel on International Financial Accountability and Transparency (FACTI Panel Report), have extensively outlined strategies to combat IFFs. Unpacking the Challenges: Global bonds: US borrowing costs are hurting the rest of the world Last week, African Development Bank AfDB President Dr Akinwumi Adesina, at the launch of Macroeconomic Performance and Outlook (MEO) of the African continent on April 12, was vocal against the unfair allocation of the International Monetary Fund's (IMF) Special Drawing Rights (SDRs), noting that the continent received a measly $33 billion from the global lender, 4.5% of the $650 billion issued globally. Hence, the African agenda at the G20 is a mountain to climb. In the same week, a new Cost of Capital, report by Jeffry Sachs et al of Columbia University was more concerning: Within the African context, Africa's median public debt ratio has been on an upward trajectory since the beginning of this decade from 54.5% of GDP in 2019, to 64% in 2020, moving to around 63.5% from 2021–23 according to the Africa Economic Outlook 2024 report. In addition to this, the flow of FDI, ODA, portfolio investments and remittances dropped by 19.4 % in 2022. With high debt servicing costs, and strained tax capacities as evidenced by a median of a tax to GDP ratio of 14% in Africa, this region is experiencing constrained fiscal space which is crowding out financing for critical public services such as health and education. On the streets of African capitals, cost of living riots are mushrooming. These macroeconomic outlook indicators are grave and if the world economy faces a recession many nations in the global South and within Africa will be at depression-era levels. ( Sachs et al, Caos of Capital report, Columbia University) The unfortunate truth is that both public and private resources have not been enough to finance the development needs of Africa and other Global South countries, especially in the wake of major economic shocks. Access to finance through the global financial architecture has been particularly difficult for many developing countries with little to no access to concessional loans/grants, higher financing costs and limited representation in international financial institutions. Back to basics. Bold solutions needed from South Africa's G20 2025 leadership So given the deepening policies especially in the context of Trump 2.0 trade wars and EU Development aid budget cuts, which may see many regions going into recession, bold and even radical solutions are needed. Some suggestions: Tobin Tax on Financial Transaction At the dawn of the Millenium, the global community began discussion on supporting the UN Millenium MDGs, during the African debt crisis, there was a robust debate on the potential of a Tobin Tax on financial transaction. Named after Nobel laureate Dr James Tobin, the debate was shelved, but it is still relevant. In the current polycrisis, a currency tax is a levy on international capital flows and, as such, is a regulatory and fiscal counterpart to capital liberalisation and globalisation. In an environment of diminished nation-state economic sovereignty, the idea offers the opportunity to restore some of governments' lost taxation power and potentially raises the challenge of supranational taxation and redistribution of revenues within the international community. It has the additional advantage of being a levy on a sector that is relatively under-taxed at present. (Oxfam Tobin Tax Report, 1999) The report cautions that there needs to be a trade-off between the aims of stabilisation and development funding. According to its advocates, a currency transaction tax would be a strategic element of global financial management since it can: a) reduce short-term, speculative currency and capital flows b) enhance national policy autonomy c) restore the taxation capacity of nation-states affected by the internationalisation of markets. The tax is an attractively simple formula for reducing destabilising flows. (Oxfam, 1999) The profitable = revenue base of financiers and bankers consists of very short-term, two-way speculative and financial arbitrage transactions in the inter-bank market. The greater the frequency of transactions, the higher the tax charge can be applied to reduce speculation. This policy intervention appeal consists of being a disincentive to short-term transactions while not inhibiting international trade, long-term capital flows, or currency price adjustments based on changes in the real economy.
Business Recorder
29-04-2025
- Business
- Business Recorder
World Bank approves $108mn additional financing for KP projects
ISLAMABAD: The World Bank has approved $108 million in additional financing to the Rural Accessibility Project ($78 million) and to the Khyber Pakhtunkhwa Integrated Tourism Development Project ($30 million) to enable both projects achieve their objectives in improving access to health and education services, markets and jobs, in a way that strengthens resilience to natural disasters in the province. 'By rehabilitating critical rural road infrastructure and enhancing disaster preparedness, the Khyber Pakhtunkhwa Rural Accessibility Project and the Khyber Pakhtunkhwa Integrated Tourism Development Project are not only improving access to essential services like health and education, but also fostering climate, economic resilience and creating job opportunities for local communities,' said Najy Benhassine, World Bank Country Director for Pakistan, in a statement on Tuesday. IMF-World Bank meetings end with little tariff clarity, but economic foreboding The $78 million in additional financing for the Khyber Pakhtunkhwa Rural Accessibility Project (KPRAP) will focus on providing safe and climate resilient road infrastructure, by upgrading and rehabilitating rural roads, thereby improving access to services including schools, health facilities, and markets. The project is also supporting safe and affordable transport to school for girls. Overall, around 1.76 million people are expected to benefit from the project. 'This additional financing underscores the World Bank's commitment to supporting Pakistan's and Khyber Pakhtunkhwa Province's development goals,' said Muhammad Bilal Paracha, Task Team Leader for the project. 'The project is crucial for improving the lives of people in the province, particularly women and girls, by enhancing access to essential services and economic opportunities.' The $30 million in additional financing for the Khyber Pakhtunkhwa Integrated Tourism Development Project (KITE) is expected to help enhance the province's tourism sector by completing the rehabilitation of two roads that will improve access to the province's pristine tourist spots in the vicinity. Pakistan: World Bank likely to extend CD for CASA-1000 It will also support technical assistance and capacity building for the tourism industry and public sector stakeholders. The additional financing will support better destination management, heritage conservation, and the integration of digital platforms in Khyber Pakhtunkhwa's tourism industry. 'The KITE project is encouraging responsible tourism in Khyber Pakhtunkhwa in collaboration with public and private sector stakeholders,' said Kiran Afzal, Task Team Leader for the project. 'This means better roads, improved tourist facilities, and more opportunities for local communities to benefit from the growth of the tourism economy. The project will create jobs, train local people, and preserve the country's rich cultural heritage.'
Straits Times
29-04-2025
- Business
- Straits Times
Bessent says it's up to China to de-escalate the trade war
US Treasury Secretary Scott Bessent said 'all aspects' of the US government are in contact with China but that it is up to Beijing to take the first step in de-escalating the tariff fight with the US due to the imbalance of trade between the two nations. 'We'll see where this goes,' he said in an interview with CNBC. 'As I've repeatedly said, I believe it's up to China to de-escalate because they sell five times more to us than we sell to them, so these 125 per cent tariffs are unsustainable.' The Chinese exempting some goods from tariffs indicates they are interested in reducing tensions, he said, adding that he has 'an escalation ladder in my back pocket and we're very anxious not to have to use it'. Escalation could include an 'embargo,' he said. Mr Bessent said the US has put China to the side for now as it seeks trade deals with between 15 to 17 other countries. He said he would not be surprised if a trade deal with India is the first to be announced. He also said that US officials met their Chinese counterparts during the IMF-World Bank meetings in Washington DC last week to talk about 'financial stability' but did not indicate that trade discussions came up during the talks. BLOOMBERG Join ST's Telegram channel and get the latest breaking news delivered to you.
