Summary PTI has pledged to increase social spending, reduce taxes and lower energy costs.
ISLAMABAD (Dunya News) - Moody’s Investors Service says narrow tax base will remain the key challenge for the new government in Pakistan as pervious governments achieved limited success on tax reforms.
The Election Commission (ECP) said Friday that with only 11 seats left to count, Imran Khan’s Pakistan Tehreek-e-Insaf (PTI) enjoys a strong lead with 114 seats, and will be the biggest party in parliament.
Imran Khan in a wide-ranging address to the nation expressed concern over depleting forex reserves and foreign investment and stated that mass-reforms will be introduced. "We will craft policies in collaboration with the business community," he said.
In a statement following the election results, Moody’s said it expects the PTI party to form a coalition government with smaller parties and independent candidates.
“Pakistan’s heightened external vulnerability is the chief credit challenge in the near term for a new PTI-led coalition government. Possible policy options would include monetary and fiscal policy tightening, further exchange rate depreciation, and turning to the IMF for external financing,” it said.
The service noted that such implementation may face delay as the party has pledged to increase social spending, reduce taxes and lower energy costs.
“Longer term, Pakistan’s credit challenges include the country’s very low global competitiveness; institutional weaknesses relating to governance, rule of law and control of corruption; and a narrow tax base.
“We expect the ongoing implementation of the China-Pakistan Economic Corridor to drive improvements in power supply and infrastructure, which should raise economic competitiveness and boost industrial activity over time,” it added.
Moody’s said the party’s anti-corruption campaign has the “potential to address some long-standing institutional weaknesses”, but added measures to improve governance and tackle corruption will be “challenging for any new government to implement”.
A Bloomberg report also echoed what Moody s said about Pakistan s economic woes, saying the new government has to support the depreciation of the falling foreign exchange reserves.
The report said that in the current scenario, the country will need $10-15 billion loan from the IMF, whose attainment will be a difficult stage as the organisation will implement the reforms agenda that includes privatization and addition in tax net.
