APBF President says Pakistan core issue is high cost of doing business
ISLAMABAD
As the central bank has jacked up its key policy rate by 100 basis points to 16% — the highest level since 1999- the All Pakistan Business Forum (APBF) observed that the high interest rate in a low growth environment will create bad debts in the private sector, squeezing fiscal space for development, adding that the current monetary policy will stifle capital formation both in the public and the private sectors.
APBF President Syed Maaz Mahmood called for quick and serious measures to revive industrial growth, as the businesses have been facing severe financial crunch amidst, soaring fuel & energy cost, delaying sales tax refunds and rising markup rate.
He stressed the need for increasing ease of doing business, lowering cost of production, paying early refunds to the industry to solve liquidity crunch, relaxing import policy for industrial raw material, and equalizing the energy tariff across the country.
APBF Chairman Ibrahim Qureshi said that Pakistan’s core issue is the high cost of doing business, which the government needed to bring down to bring the industry at par with global competitors.
He asked the government to work on a fast track plan to address energy issues too. Priority should be given to the industrial sector, which was the highest value-added link in the entire value chain.
Ibrahim Qureshi warned the authorities that rising inflation can hurt economic growth in Pakistan and a careful policy is required to keep it in control, as the present rigid monetary policy stance of the central bank has failed to contain the hyperinflation in the country.
Syed Maaz Mahmood observed that the industry has suffered from the double-edged sword of food and energy prices with transport inflation peaking to a record 65% while the annual inflation rate increased to 27% in fiscal year 2021-22.
The APBF President called for adopting an alternate strategy, as Pakistan does not currently have a fuel shortage and the nation can divert supplies to high priority sectors like power generators in emergency situations.
The government will have to attempt to boost energy conservation, cutting working hours for public servants and ordering shopping malls to factories to shut early in various cities.
He pointed out that despite nominal growth, the inflationary pressures is again building up in the economy while steep depreciation of the rupee is pushing up prices of imported industrial inputs, which will further cripple industrial activities. He said that it is high time that the government should revise interest rates to turn Pakistan into a production economy. Our future lies in strengthening the production sectors, but that would require the government to cut the cost of credit as there is no justification to keep interest rates that high particularly when this policy is unlikely to produce the desired results in the wake of cost-push inflation,” he added. He said that there is a consensus that a low inflation rate helps economic activities, while high inflation hurts economic growth. The high inflation environment affects decision making of all economic agents in economy, like investors, savers, consumers and producers through uncertainty about the expected payoffs from their decisions.
The APBF President stated that a persistently high inflation also causes erosion of the value of the local currency in terms of foreign currencies. Such uncertainties, in turn, have adverse implications for economic activities. He said the IMF loan would have devastating effects on the economy, as with more taxes and increased rates of utilities, cost of production have been further increased. This will render Pakistani exports uncompetitive in the global market.
