Predicting that Pakistan’s economy will grow at just 0.6 per cent this year, the Asian Development Bank (ADB) has advised Pakistan to provide targeted subsidies to reduce inflationary pressure on people and increase the tax-to-GDP ratio to address uncertain economic situations and steer the economy towards a sustainable growth trajectory, Geo News report.

ADB Director General, Central and West Asia Department Yevgeniy Zhukov and Country Director Pakistan Resident Mission Yong Ye stressed on the importance of targeted subsidies to assist downtrodden segments of the society and effective mobilization of domestic resources to help improve the economy of Pakistan. Yevgeniy Zhukov and Yong Ye made the statement in a joint interview with APP after the ADB’s 56th Board of Governors meeting at Incheon in South Korea.

Yong Ye emphasised strengthening the Benazir Income Support Programme (BISP), improving its verification system and making this package more affordable for Pakistan by reaching to only those people who needed assistance.

The ADB has predicted that the economy of Pakistan will grow at just 0.6 per cent this year, which will witness a drop from last year’s 6 per cent growth.

Yevgeniy Zhukov said the ADB had been providing financial assistance to the Pakistan government to strengthen social security through the BISP programme. He said the ADB was engaged with the BISP since 2016 and has provided assistance of USD 600 million since 2021 in health and education sectors in addition to USD 1.5 billion, under the Countercyclical support facility of which a major part is used through BISP.

Zhukov said that Pakistan should improve revenue collection as it has one of the lowest tax-to-GDP ratios standing at only 10 per cent. He noted that the Pakistan government might not have enough money to provide support and increase income if it is collecting only 10 per cent.

He called it “important” for Pakistan’s current and coming governments to continue working on structural reforms for domestic-resource mobilization. Zhukov stressed that there was a need to improve the public sector governance and carry out the reform process seriously in Pakistan.

Meanwhile, International Monetary Fund (IMF) has said that it is preparing to discuss Pakistan’s budget plans for the coming financial year as part of a process to unlock a crucial financing injection.

This is being seen as a fresh obstacle to the release of the pending bailout funds amounting to USD 2.6 billion. Many are assuming that the programme will continue to remain in limbo at least until the next budget is passed, Dawn reported.

Since February, when the formal talks resumed between Pakistan and the IMF for the completion of the ninth review of the lender’s stalled USD 6.5 billion funding programme, it has been a ‘one step forward, two steps back’ situation for Pakistan. The IMF deal is crucial for tackling Pakistan’s severe balance-of-payments crisis, and avoiding default and potentially difficult debt restructuring.