As not a single party has gained simple majority in the National Assembly in the general elections and there would be a coalition federal government the All Pakistan Business Forum has warned that the financial constraints and the economic challenges are awaiting the incoming government amidst highest record inflation and unemployment in the country.
The APBF President Syed Maaz Mahmood said that the new government would have to face mammoth economic challenges. The country is facing challenges like higher inflation and unemployment rates, ongoing IMF program and possible engagement for fresh program to improve balance of payments situation, debt restructuring, framing new resource sharing formula between centre and provinces, National Finance Commission (NFC) and privatization of loss-making state-owned entities. However, it would be a challenging task for the coalition government.
He said that results of the current general elections are indicating for establishing a coalition government at the federal level, which would have to deal with plethora of economic issues including higher inflation and unemployment rates, dealing with International Monetary Fund (IMF), debt restructuring and others.
The Pakistan Stock Exchange opened the day on a negative note as the benchmark index plunged over 2,000 points on Friday as uncertainty surrounded election 2024 results. The KSE-100 shares index, the bench mark of the country’s capital market, fell below the 62,000 mark by losing 2,145.53 points or 3.34% during the intraday trading.
APBF Chairman Ibrahim Qureshi said that the stocks, a day before the general elections in Pakistan, closed on a higher note, boosted by a pre-election rally and hopes of an upgrade in the country’s credit rating, but trading volumes remained thin as investors stayed cautious. The PSX gained 344.85 points or 0.54% to close at 64,143.87 points on Wednesday.
Ibrahim Qureshi said that the global ratings agency, the S&P has recently stated that a more stable political environment in Pakistan is likely an important precondition to repairing the government’s creditworthiness. The rating agency in a note on Pakistan stated that together with new policy moves to improve investor confidence and bring down inflation, this could lift fiscal and external metrics sufficiently for the sovereign ratings to move to the “B” rating category. It further stated that if the coming elections yield a government that has popular support and able to work with key institutions in the country, it will have a better chance of securing external financing from the International Monetary Fund (IMF).
Syed Maaz Mahmood said that the country is currently witnessing higher inflation rate, which would be a main challenge for the new coalition government. Inflation has remained in the range of 28 to 29 percent in the last few months mainly due to increase in energy prices.
According to the World Bank’s Ease of Doing Business Index, Pakistan is ranked 136th in the world overall and 172nd, in terms of tax compliance. According to these rankings, the major obstacles to economic investment at the moment are the government’s complex systems, lack of transparency, and complex tax laws and regulations. Further, to boost foreign exchange revenues, the federal government must prioritize export promotion strategies. This can be accomplished by increasing export competitiveness, diversifying export products, supporting exporters, and locating new markets through trade agreements and diplomatic efforts.
The World Bank’s Paying Taxes report states that the sub-indicators of the overall measure of paying taxes, such as the number of payments and time to comply, in particular, evaluate the advancement of online tax filing and payment. The extent of these indicators decreases as IT-enabled tax system procedures increase. According to this data, Pakistan is ranked lower among the Asian Pacific nations for overall taxpayers. Several actions can be taken to address Pakistan’s fiscal and economic issues and provide pave the road forward such as strengthening tax administration and broadening the tax base by bringing more individuals and businesses into the tax net. It is crucial to promote economic documentation to increase revenue collection, diminish the informal economy, fight tax evasion, and boost tax collection methods through automation and digitalization. To lessen reliance on external borrowing and manage the present debt burden successfully, a strong debt management strategy is also urgently needed.
Additionally, to encourage investment and job creation, it is crucial to make doing business easier by streamlining regulations and removing administrative roadblocks. Additionally, it is crucial to take action in key industries like manufacturing, information technology, and agriculture. By reducing bureaucratic red tape and streamlining regulatory processes, the ease of doing business is increased. It is also crucial to support public-private partnerships and collaborate with foreign organizations for advice and knowledge.