Report Highlights Policy Regimes Impacting Pakistan’s Economy and Unemployment

Pakistan’s economic challenges, including rising unemployment, are not due to a lack of ideas but stem from entrenched policies hindering job creation and investment, a report revealed. The report emphasized that these policies favor specific elites at the expense of the broader population, making it difficult to create significant job opportunities.
One major issue identified in the report is the normalization of high-interest rates in Pakistan, which has benefited banks and large depositors but negatively impacted small businesses and sectors like construction and manufacturing.
The report suggested that shifting towards a growth-oriented monetary policy and providing targeted credit to key sectors could potentially lead to the creation of around 1.4 million jobs.
Another concern raised in the report is the withholding tax system, which imposes turnover-based taxes as final taxes, discouraging compliance and investment. The report proposed transitioning to income-based taxation and simpler digital compliance to formalize businesses and potentially create 1.3 million jobs.
Criticism was also directed at long-standing protectionist measures in the automobile sector, where high tariffs have shielded a few assemblers, resulting in high car prices and limited job opportunities. The report recommended opening the sector to competition with certain conditions to boost job creation.
Furthermore, the report highlighted issues in the sugar industry, where subsidies and guaranteed prices benefit a select few, leading to water wastage and financial drain. Shifting focus to higher-value crops and food processing could potentially create over 760,000 jobs in various related sectors.
Lastly, the report pointed out the negative impact of capacity payment contracts in the power sector on the economy, suggesting a need for reform in this area to spur growth and development.