HomeBusinessEconomyADB advises targeted tax and subsidy measures to aid Pakistan's economic recovery

ADB advises targeted tax and subsidy measures to aid Pakistan’s economic recovery

In order to escape the current economic uncertainties, the Asian Development Bank (ADB) has advised Pakistan to introduce targeted subsidies to reduce inflationary pressures and raise the tax-to-GDP ratio, which can help Pakistan’s economic recovery.

Both the Central and West Asia Department’s Director General, Yevgeniy Zhukov, and the Pakistan Resident Mission’s Country Director, Yong Ye, emphasized the importance of targeted subsidies to assist society’s most vulnerable groups as well as the mobilization of domestic resources to support the national economy. In order to guarantee that only those who truly need the help receive it, they also recommended strengthening the Benazir Income Support Program (BISP) and upgrading its verification procedure.

Zhukov highlighted that since 2016, the ADB has been giving the government financial support under the BISP initiative to boost social security. Since 2021, the ADB has given conditional cash transfers totaling $600 million for health and education and an additional $1.5 billion under the Countercyclical Support Facility.

To help individuals who are most negatively impacted by current challenges, a sizeable chunk of this funding will go to the BISP. In addition, Zhukov recommended that Pakistan increase its revenue collection because its tax-to-GDP ratio of 10% is among the lowest in the region. He issued a warning that if the government is only collecting 10%, it might not have enough money to support its citizens and increase revenue.

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In response to Pakistan’s terrible floods last year, the ADB, World Bank, European Union, and United Nations all committed support. Yong Ye also mentioned that a follow-up meeting of the Geneva conference will soon be held to discuss progress. Zhukov expressed his sympathy for those affected by the floods and noted that the ADB had approved a $1.5 billion program for Pakistan prior to the floods to address the damaging effects of the Russia-Ukraine war on the nation’s economy. This program was later repurposed to provide social protection for those affected by the floods.

Additional emergency aid, including a $175 million loan and $5 million in grants, has been granted by the ADB to repair damaged infrastructure and build a more resilient system that can weather future floods. The bank is collaborating with Pakistan and other partners, including the World Bank and the International Monetary Fund, to implement significant structural changes in the administration of public finances, the mobilization of domestic resources, and the energy sector. To ensuring the reform program is advanced, the ADB is committed to working with its partners and the Pakistani government.



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