April 4, 2024 (MMF): The latest United Nations Economic and Social Survey for Asia and the Pacific region, released by the UN Economic and Social Commission for Asia and the Pacific (UN-ESCAP), forecasts a positive trajectory for Pakistan’s economy. The survey projects a significant acceleration in the country’s economic growth for the current year and the next, with real GDP growth rates of two percent and 2.3 percent, respectively.
According to the survey, inflation is expected to ease from 26 percent in 2024 to 12.2 percent in 2025, indicating a favorable outlook for price stability. However, the report highlights challenges faced by Pakistan’s economy, including political unrest and disruptions caused by natural disasters such as massive floods, which have adversely affected business and consumer sentiment, as well as agricultural production.
The survey acknowledges that an agreement with the International Monetary Fund (IMF) in mid-2023, coupled with assistance from China, Saudi Arabia, and the United Arab Emirates, has contributed to restoring some macroeconomic stability in 2023. It also underscores ongoing fiscal adjustments aimed at restoring stability, including the removal of subsidies for the power sector.
Despite relatively low tax levels, the survey notes that moderate tax gaps persist, posing challenges for bridging development financing gaps. The report suggests that while better tax policies and administration are essential, broader improvements in socioeconomic development and public governance are also needed to enhance tax revenue on a larger scale.
Overall, the UN survey indicates cautious optimism regarding Pakistan’s economic prospects, emphasizing the importance of continued reforms and efforts to address structural challenges for sustainable growth and development.
UN SURVEY URGES URGENT ACTION FOR AFFORDABLE AND LONG-TERM FINANCING IN ASIA-PACIFIC
The recent United Nations Economic and Social Survey for Asia and the Pacific region underscores the urgent need for affordable and long-term financing in developing countries across the region. Many of these countries face the challenge of balancing debt servicing with investments in crucial areas such as education, health, and social protection.
According to the survey, addressing this challenge requires new perspectives and approaches. It suggests that donors prioritize the development financing needs of recipient countries over political interests. Multilateral development banks are urged to enhance their lending capacities through fresh capital injections. Additionally, credit rating agencies are called upon to adopt a long-term perspective, recognizing that public investments in shared development goals enhance fiscal credibility over time.
The survey advocates for stronger public revenue collection to close the “tax gap” and reduce fiscal risks and borrowing costs. Digitalizing tax administration and implementing policies to increase society’s willingness to pay taxes are identified as untapped potentials in this regard.
Moreover, the survey highlights the need for more developed capital markets in the region to unlock substantial domestic savings and increase the supply of long-term capital for investments in the Sustainable Development Goals (SDG).
These recommendations underscore the importance of collaborative efforts and innovative strategies to address the financing challenges faced by developing countries in the Asia-Pacific region. By prioritizing sustainable development and fostering inclusive growth, countries can work towards achieving their socioeconomic objectives while ensuring financial stability and resilience.
UN SECRETARY-GENERAL AND UN-ESCAP EXECUTIVE SECRETARY ADDRESS FINANCIAL CHALLENGES IN ASIA-PACIFIC
In the latest United Nations Economic and Social Survey for Asia and the Pacific region, UN Secretary-General Antonio Guterres highlighted the challenges faced by governments in the region due to an unjust and outdated global financial architecture. He emphasized that fiscal constraints, rising borrowing rates, shorter loan maturity, and heavy debt burdens are hindering the economic development of developing countries across Asia and the Pacific.
Guterres also expressed concerns about widening income inequality in the region, noting that national minimum wages, adjusted for inflation, have declined in several countries in recent years. This trend further weakens the ability of lower-income groups to cope with weak job opportunities and high food prices.
Echoing similar sentiments, UN-ESCAP Executive Secretary Armida Salsiah Alisjahbana emphasized the strategic deployment of public debt to invest in the Sustainable Development Goals (SDGs). She highlighted that such investments not only benefit people and the environment but also contribute to lowering public debt as a percentage of gross domestic product (GDP) over the long term.
The survey revealed that while average economic growth in the developing Asia-Pacific region increased from 3.5 percent in 2022 to 4.8 percent in 2023, this rebound was concentrated in a few large countries. Despite this, GDP growth in the region is projected to remain relatively steady but below the pre-pandemic trend, at 4.4 percent in both 2024 and 2025.
These statements from key UN officials underscore the urgent need for reforms in the global financial architecture to address the challenges faced by developing countries in the Asia-Pacific region. By prioritizing strategic investments and fostering inclusive growth, countries can work towards achieving sustainable development and reducing inequality in the region.
ECONOMIC HEADWINDS AND STRATEGIES FOR ASIA-PACIFIC DEVELOPMENT
The latest United Nations Economic and Social Survey for Asia and the Pacific region highlights several economic headwinds faced by the region’s economies, including uncertain inflation and interest rate trends, escalation of geopolitical tensions, and trade fragmentation. Despite these challenges, the survey underscores the importance of a strong and fair taxation system and efficient public spending to finance essential public investments.
While emphasizing the need for governments to borrow to finance sustainable development investment needs, the survey notes a shift in the composition of external public debt owed by countries in the region. Over the past decade, the share of external public debt owed to official creditors has decreased, with private creditors, particularly bondholders, becoming the main creditors for countries in the region.
A new quantitative analysis conducted by the UN Economic and Social Commission for Asia and the Pacific (ESCAP) demonstrates that macroeconomic fundamentals, such as inflation, exchange rate volatility, fiscal position, sovereign credit rating, and capital market liquidity, significantly influence government borrowing costs in several Asia-Pacific economies.
The survey advocates for strengthening tax revenue collection and boosting domestic savings as crucial strategies for economic development in the region. Despite challenges, the developing Asia-Pacific region has made notable progress in tax revenue mobilization, with the average tax-to-GDP ratio increasing from 13 percent in 2001 to 17.8 percent in 2011 before moderating to 15.7 percent in 2021 amid the pandemic.
These findings underscore the importance of policy measures aimed at enhancing fiscal resilience, promoting sustainable development, and fostering economic stability and growth in the Asia-Pacific region. By addressing structural challenges and implementing targeted reforms, countries can navigate economic headwinds and achieve their development goals.
