GST and Cash Transfers: Double-Edged Fiscal Policies in Pakistan

A World Bank study highlights the dual impact of Pakistan's fiscal policies. The General Sales Tax contributes significantly to rising poverty, while the Benazir Income Support Programme aids in reducing inequality. The report calls for reforms in taxation and public spending to address economic disparities.

A recent World Bank study reveals contrasting effects of fiscal policies in Pakistan, spotlighting the General Sales Tax (GST) and cash transfers. According to the study, GST is the leading factor contributing to increased national poverty, as it constitutes over 7 percent of households' pre-tax expenditures, further straining poor families.

Conversely, the Benazir Income Support Programme (BISP) stands out for reducing inequality through monthly cash transfers to the poorest families. The World Bank notes BISP's significant role in advancing fiscal equity by benefiting the most vulnerable, despite ongoing challenges in the tax system.

The report urges Pakistan to enhance revenue generation and public spending efficacy, directing additional resources towards social welfare and effective tax policies, to ultimately mitigate poverty and inequality's long-standing issues.

(With inputs from agencies.)