BMP for policies revisit, as economic indicators remain depressed throughout 2023


Mian Anjum Nisar says major indicators continued to show poor performance in 2023
The Federation of Pakistan Chambers of Commerce & Industry’s Businessmen Panel (BMP) has stressed the need for a revisit of the economic policies, as the economic indicators throughout the 2023 remained very depressed amidst high inflation, low exports, depleting foreign reserves and continued uncertain position of the local currency.
FPCCI former president and BMP Chairman Mian Anjum Nisar said that almost all indicators of the economy continued to show poor performance during 2023, including volatile exchange rate, unprecedented hike in markup rate, repeated increases in electricity rates, gas shortage, price spiral, mismanagement and bad governance, becoming the hallmarks of the govt.
He observed the negative economic indicators and uncertainty over resumption of the International Monetary Fund program continued to push the rupee towards a new historic low against the US dollar especially in first half of the calendar year of 2023. He said that massive fall of rupee value continued to damage the economy, as the rupee witnessed a huge depreciation; one of the highest devaluations of local currency in Pakistan’s history in this period.
Mian Anjum urged the policy makers to concentrate on increasing tax-to-GDP ratio which was the lowest in Pakistan in the region in 2023. The BMP leader warned if the government failed to take appropriate measures for economic revival, the trade and industry will face a complete shutdown, asking the government to convene a conference, taking the business community onboard.
The FPCCI former president observed that besides increasing exports and controlling imports the government will have to take administrative measures, as a large demand of cash dollars are seen in the market. He argued that this devaluation of the currency was dictated by the IMF through prior actions and it has nothing to do with macroeconomic fundamentals. He said that there was a complete breakdown of economic policymaking, as the country’s fiscal policy had become subservient to monetary and exchange rate policies.
He said that the monetary tightening and exchange rate depreciation resulted in higher inflation, public debt and debt servicing. The empirical evidence showed that the one percent monetary tightening hiked the inflationary pressure by 1.3 percent in the case of Pakistan, he added. The government needs to devise a strategy on war-footing to increase foreign investment in Pakistan so as to stop the upward trajectory of the dollar, he added.
The rupee during through the whole year remained uncertain, as the uncertainty pertaining to the IMF program was causing pressure on the Pakistani rupee while the country’s foreign exchange reserves have also declined, which was another source of concern for investors, he said.
He added that the SBP’s move to impose fines on exporters delaying receipt of payments proved ineffective. While demanding a clear roadmap for the revival of economy, the BMP Chairman termed the country’s financial crisis as a nerve-shattering for trade and industry. There was a consensus among the business community that there was a lack of coherence in the government policies and things on economic front went shaky instead of moving for the last several months.
Exports went down quantitatively while the situation of new investment remained very bleak during the year 2023, they observed, adding that the Monetary Policy Committee of the State Bank of Pakistan has maintained the key interest rate at 22 percent the highest level since October 1996. The government can blame the IMF or some unfriendly foreign powers for its economic predicament if it wants.
But it cannot deny that it is in hot water today due to its misplaced confidence that it could deviate from the IMF program and turn to friendly countries for its dollar requirements to avoid defaulting and these countries also seem to be siding with the lender, providing Pakistan only enough to keep it going until the bailout loan is finalized. With a large credibility gap and trust deficit exacerbated by the ongoing political drama in the country, it is foolish to expect them to step up to help us in a big way without the IMF on board.
The IMF is now showing further strictness on issues such as the exchange rate, interest rate, external financing gap and the permanent debt-servicing surcharge on electricity. It must be pointed out that some of the new IMF conditions, such as linking interest rates with headline inflation and the imposition of permanent debt surcharge on electricity, seem quite unreasonable.
He appealed the IMF to show some elasticity on these conditions to prevent the country’s economic crisis from getting out of hand. He said power tariff registered an upward trend manifold and due to this single reason, Pakistani merchandise failed to get due appreciation in the international market and the neighboring countries made huge gains.
Calling for bringing down the rate of interest, he said the State Bank of Pakistan should focus on banking spread that was intolerable and pushing the equity away from the reach of business community.
Anjum Nisar said that in view of achieving exports target and stabilization of the economy we need accommodative monetary policy measures by extending reduction in the policy rates so that the debt liability of the business sector is compensated through lower markup rate.
He also demanded the immediate reduction in the electricity tariff, especially for the Small and Medium Enterprises (SMEs) as a first step towards a cut in the production cost, while the second and vital step towards this direction would be bringing discount rate to the regional level with a view to provide level-playing field, especially to the export industry.