Fostering Fiscal Sustainability: Insights on Pakistan’s Economic Challenges

Insights on Pakistan’s Economic Challenges

Fostering Fiscal Sustainability

The conversation highlights the importance of diversifying Pakistan’s economy by promoting sectors like IT and technology, light engineering, and green financing. This diversification is expected to reduce fiscal pressure and encourage sustainable development.

This clip was originally posted on New Wave Global Facebook Page.

See full video podcast: Zafar Masud in Discussion with Nauraiz Rana of New Wave Global — Video Podcast

Nauraiz Rana

  • Pakistan has a low rate of financial inclusion, with only 27% of the workforce in the formal sector. This means that 73% of the workforce is not included in the formal financial system, which has a number of negative consequences for the economy.
  • One of the main consequences of informality is that it reduces the government’s tax base. When businesses operate in the informal sector, they do not have to pay taxes, which deprives the government of revenue that could be used to fund public services and infrastructure.
  • Another consequence of informality is that it makes it difficult for businesses to grow and invest. Businesses in the informal sector often have difficulty accessing credit from banks and other financial institutions, which can limit their ability to expand and create jobs.
  • Informality also has a negative impact on workers. Workers in the informal sector are often not covered by social safety nets, such as social security and unemployment insurance. This means that they are more vulnerable to financial hardship in the event of illness, unemployment, or other unexpected events.

Zafar Masud

  • The government of Pakistan has taken some steps to address informality, such as reforming the taxation system and making it easier for businesses to register. However, more needs to be done to address the root causes of informality, such as the lack of access to finance and the complex regulatory environment.
  • Masud argues that the government needs to adopt a more holistic approach to addressing informality. This approach should include:
    • Reforming the taxation system to make it simpler and more transparent.
    • Reducing the regulatory burden on businesses, especially small and medium-sized enterprises.
    • Investing in education and training to improve the skills of the workforce.
    • Providing financial incentives to businesses that formalize and start paying taxes.
  • Masud also emphasizes the importance of international cooperation in addressing informality. He argues that developed countries should provide financial and technical assistance to developing countries to help them reduce informality and promote financial inclusion.

In addition to the above, here are some other points that can be made about financial inclusion and informality in Pakistan:

  • Financial inclusion is important because it allows people to save money, invest in their future, and access credit when they need it. This can help people to improve their lives and escape poverty.
  • Informality is a complex problem with a number of causes, including poverty, lack of education, and complex regulations. There is no easy solution to informality, but a combination of approaches, such as those outlined by Masud, can be effective.
  • Addressing informality is essential for Pakistan’s economic development. By reducing informality, Pakistan can increase its tax base, promote investment, and create jobs. This can lead to higher economic growth and improved living standards for all Pakistanis.


Financial inclusion and informality are two important issues facing Pakistan today. By addressing these issues, Pakistan can boost its economy and improve the lives of its citizens.

Addressing financial inclusion and informality is a complex challenge, but it is one that Pakistan must address in order to achieve its economic development goals. By taking a comprehensive approach to these issues, Pakistan can create a more prosperous and inclusive society for all of its citizens.

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