ISLAMABAD: The National Assembly’s Standing Committee on Finance and Revenue has passed the Fiscal Responsibility and Debt Limitation (FRDL) Amendment bills 2021 aimed at reducing the country’s debt to GDP ratio to 60 percent in six years.
The committee, which met here under the chairmanship of Member National Assembly (MNA) Faizullah, discussed various points of the Bill and unanimously approved the new law. A finance ministry representative briefed the committee about FRDL and informed the bill proposed to reduce the country’s overall debt-to-GDP ratio in next six years.
He said the target is set to decrease debt-to-GDP ratio by 2 percent annually and outstanding guarantees by 10 percent of GDP. MNA Faizullah said that there would be room for loans in case of an increase in expenditure so that the system can continue to function.
Asian Development Bank (ADB) had recently said that Pakistan has one of the lowest trade-to-GDP ratios in the world showing at just 30 percent. However, it noted the country has a lot of room for improvement and one viable strategy that Pakistan can adopt to boost its growth is to further open its economy to trade.
A report said that at just 30 percent, Pakistan exhibits one of the lowest trade-to-GDP ratios in the world Studies have affirmed numerous benefits to economic openness, including opportunities for specialisation, access to wider markets, the inflow of know-how, and the formalisation of the economy.
The report notes the country does not have significant trading ties with neighbours in South Asia. The existing patterns indicate that Pakistan’s trade is currently oriented to the United States, Europe, China and Middle East but does not have a significant trading relationship with its proximate neighbours in South Asia.
READ MORE: Pakistan’s GDP growth revised to 5.37% in FY21
It added that while vast majority of its export products fall under the textiles grouping, formal measures of export concentration suggest that Pakistan’s exports basket is relatively more diversified compared with other major textile exporters like Bangladesh and Cambodia. However, its exports are less diversified than India.
The ADB says Pakistan is a relatively large country, however its trade openness remains remarkably low. Pakistan is less open than India and Bangladesh and more than Ethiopia, Brazil and Sudan. It said countries that have GDPs comparable to Pakistan but with much higher trade-to-GDP include Philippines, Netherlands, and Vietnam.
Pakistan has historically experienced uneven growth and remains among the least open economies in the world, even after taking its relatively large size into account. The dominance of textile products in Pakistan’s exports raises the issue of diversification, adding that concentrating too much on only a few sectors or products poses risks to an economy.
It noted that Pakistan can adopt to boost its growth to further open its economy to trade. Benefits to economic openness include opportunities for specialisation, access to wider markets, inflow of investments, technology, and know-how. There is also evidence that trade promotes the reallocation of labour from the informal to the formal sector, it added.
