Mian Anjum calls for consistent economic policies to restore market confidence
Islamabad
The Federation of Pakistan Chambers of Commerce and Industry’s Businessmen Panel (BMP) has asked the government to focus on the implementation of fiscal and energy reforms to strengthen the economy, besides ensuring the sustainable growth, as the aftershocks of the IMF program are being felt by the trade and industry now.
FPCCI former president and BMP Chairman Mian Anjum Nisar emphasized the need for consistent economic policies to restore macroeconomic stability and market confidence, as $ 1.5 billion production losses have been estimated on account of loss of only cotton crop due to recent flooding. So, the government must have to provide electricity and gas at competitive rates to the export as well as the domestic industry, besides ensuring continuous power and gas supply to the industry, he demanded.
He highlighted that Pakistan is among the countries most affected by climate change causing devastating damage to infrastructure and agriculture production.
He said that the trade and industry have been enduring the IMF program since decades, but never before has it been so devastating, as the difference this time is the country’s extremely fragile economy and the Fund’s non-negotiable condition of withdrawal of all subsidies with no exemptions or waivers.
The Businessmen Panel Chairman said that Pakistan’s precarious financial situation has landed it into a deep debt trap where an overwhelming part of tax revenue is consumed in debt servicing alone.
The Debt Policy states that as of 30 June 2022, Domestic Public Debt reached Rs31.3 trillion as compared to Rs26.2 trillion on 30 June 2021.
The key drivers for increase in public debt are primary deficit of Rs2.42 trillion, interest expense of Rs3.18 trillion and share of adverse performance of exchange rates that stood at Rs3.764 trillion. Similarly, on external front, Pakistan’s External Public Debt is recorded at $ 88.8 billion as on June 30 2022 as compared to $ 86.5 Billion on 30 June 2021.
Mian Anjum Nisar said that Pakistan’s external public debt is sourced from three major contributions, with around 48% from multilateral loans, 30% from bilateral loans, and 22% from commercial sources like banks, Eurobonds and Sukuks. He said that the increased level of external debt can pose a great risk to fiscal framework of an economy especially when current account deficit is high, foreign exchange reserves are at low levels and the exchange rate is under pressure.
Pakistan’s GDP growth since 2018 is continuously declining and rated as lowest in the region. The revenue targets are being met through oppressive and indirect taxation measures which on one hand are raising the cost of doing business and on the other, making it tough for small and medium enterprises (SMEs) considered as backbone of economy, to carry on their operations.
The FPCCI former President said that the government is not ready yet to undertake structural reforms agreed with the International Monetary Fund related to circular debt and management of state owned enterprises (SOEs). Moreover, reliance on indirect taxes for meeting revenue goals is also a major issue meaning thereby that government should improve its taxation system if it wants to create a business friendly environment.
We need a comprehensive plan to revamp or privatize SOEs as a significant portion of our revenue is directed towards these loss-making entities whereas the same can be used for developmental projects to facilitate businesses and public at large. Such projects will not only improve our infrastructure but also help to generate sufficient revenue to invest in the social sector.
Further, new avenues for revenue must be explored so as not to burden the already tax-paying community. This would enable the government to fulfill its financial requirements through organic means rather than relying on expensive borrowings. Similarly, exports, home remittances and a positive foreign direct investment (FDI) balance can offset import requirements. Pakistan’s reliance on traditional exports is responsible for poor foreign exchange reserves. Keeping in view the new era of industrial revolution, Pakistan should focus on tech based exports to increase the share of its exports.
Pakistan’s economy has been under adverse external conditions, due to spillovers from the war in Ukraine, and domestic challenges, including from accommodative policies that resulted in uneven and unbalanced growth. Steadfast implementation of corrective policies and reforms remain essential to regain macroeconomic stability, address imbalances and lay the foundation for inclusive and sustainable growth.
Efforts to strengthen the viability of the energy sector and reduce unsustainable losses are also essential. Further efforts to reduce poverty and protect the most vulnerable by enhancing targeted transfers are important, especially in the current high inflation environment.
