To ensure sustainable economic growth, Pakistan will need to maintain macroeconomic stability by gradually reducing the twin deficits. Besides prudent expenditure management, this will require broadening of the tax base to effectively finance growing expenditure obligations. Sustainability of external current account deficit calls for raising exports earnings to finance the increasing imports requirement.
Imports will remain strong as the economy’s requirements for capital and intermediate goods for industry grow. Balance of payment position will benefit from industrial diversification which is critical for export diversification as well as for encouraging import substitution (particularly in food commodities) where Pakistan has competitive advantages.