Imports-Led Tax Growth Strategy and Its Impact on Exchange Rate and Trade Deficit: A Case of Pakistan

This study aims to analyze the impacts of an imports-led tax growth strategy on the trade deficit and exchange rate in Pakistan, utilizing secondary data spanning over the period from 2001 to 2019, The study employed Auto-regressive Distributed Lag (ARDL) approach to determine both short-run and long-run relationships between independent and dependent variables. The independent variables include Tax Revenue, Exchange rate, Imports, Inflation, Money supply and Exports while dependent variable was Trade Deficit. The findings reveal a positive relationship between trade deficit and tax revenue with exchange rate and trade deficit, while money supply and imports exhibit a positive relationship with trade deficit. Conversely, exports and exchange rate display a negative association with trade deficit. The study suggests that Pakistan should curtail its import volume and enhance tax revenue to mitigate trade deficit and achieve exchange rate stability.