By Salman Siddiqui
Published in The Express Tribune on February 05, 2024
KARACHI: Pakistan’s progress has long been hindered by political uncertainty, leaving the nation at a critical juncture.
However, the upcoming general elections have reignited hope within the business community, anticipating an end to uncertainty and a path towards economic revitalization, regardless of the party or parties that form the post-February 8 government.
Yet, they caution that a weak coalition or hung parliament could further deteriorate the economy, lacking the necessary resolve to address pressing issues.
While talking to The Express Tribune, Ehsan Malik, the CEO of the Pakistan Business Council, and Anjum Nisar, former president of the Karachi Chamber of Commerce and Industry (KCCI), emphasized that securing a new IMF loan program upon the conclusion of the current one in March 2024, and restructuring the existing substantial debt, should be the foremost priorities for the incoming government. These measures are vital to bolster business confidence, stimulate economic activity, and foster sustainable growth.
In separate discussions, the two business leaders cautioned that a fragile government would encounter ongoing political hurdles in securing the new IMF program. Any delay in this process could potentially disrupt the economy, just as it begins to exhibit initial signs of stabilization.
“The next government’s primary agenda should be to secure a new IMF loan program, with debt re-profiling as the secondary priority. These measures must be pursued in tandem to bolster business confidence in Pakistan,” Malik said.
He added that Pakistan was still short of $6 billion to repay the forthcoming maturing debt. “We are to repay a total of $27-28 billion over the next two years. An IMF programme and debt re-profiling can ensure repaying the loans smoothly and on time. This will boost business confidence and continuity.”
They also urged that the new government should continue the policies of the current caretaker government, led by the Special Investment Facilitation Council (SIFC) initiative to ensure growth.
Asif Inam, Chairman of the All Pakistan Textile Mills Association (APTMA), expressed uncertainty regarding the outcome of the February 8 election and the formation of the government.
He remarked that veteran politicians, with four decades of experience, would likely continue their established practices once in power. Conversely, newcomers to politics lack experience and may struggle to deliver results. “Politicians will likely remain inactive,” he noted. “SIFC is the ray of hope. It should remain in the driving seat to lead the nation sail out the ongoing financial and economic crisis,” he said.
Nisar said the elections and formation of the next government would minimise political uncertainty instead of removing it completely. “The next IMF programme and debt re-profiling would give the required confidence to the business community.”
Pakistan’s entire earnings are being allocated towards debt repayment and interest, leaving minimal resources for government spending on economic activities. “The mandated fiscal discipline under the IMF program is crucial for sustainable economic growth.”
The former KCCI president added that the next government should focus on boosting export earnings and increasing inflows of remittances, as these remain the key to the long-lasting economic growth. “The stability in currency [rupee-dollar parity] is a must to achieve jump in exports and remittances.”
The next government should also work to control inflation reading to pave the way for the central bank to cut interest rate, which is hovering at record high 22% since June 2023. A rate cut was a must to allow businesses perform. No one could make new investment at the prevailing high interest rate, he said.
At the same time, the new government should work to minimise energy prices to make industries competitive at the local as well as the international levels.
Pakistan has lagged behind in attracting foreign investment. External investment is a symbol of the global community’s confidence on the nation.
“To attract the investment, we need a strong government, strong business planning and its implementation in letter and spirit, consistency in policies, political stability and a stable currency.”
At a meeting with Commerce Minister Gohar Ejaz this week, the Overseas Investors Chamber of Commerce and Industry (OICCI) Secretary General M Abdul Aleem briefed him on the challenges faced by foreign investors in Pakistan.
“Recent survey conducted by the chamber highlighted key concerns for existing investors … rupee devaluation, inflation, cost of doing business in Pakistan and increasing tax burden being identified as the top pain points,” he said.
A local research house, Topline Research has said in a commentary that most of the political parties are chanting popular slogans to win the next election, but no one is realising that controlling the high inflation reading is the key towards the economic turnaround.
Malik, the PBC CEO, said that political parties have not mentioned tough decisions in their election manifestos. “None-of the leading political parties have mentioned a new IMF loan programme after March … despite the fact that whosoever would form the government would go to the global lender to continue economic activities achieved during the caretaker government.”
The new government should continue restructuring of the Federal Board of Revenue (FBE) initiated by the caretaker government to boost business confidence. Malik quoted Caretaker Finance Minister Dr Shamshad Akhtar as saying that they targeted to double the tax-to-GDP ratio to 18% over next five years.”
Pakistan Muslim League-Nawaz’s (PML-N) manifesto targets tax-to-GDP ratio at 13.1% during its government if it comes into the power, he said. The Pakistan Peoples Party’s (PPP) election manifesto targets tax-to-GDP ratio at 15%.
The next government would have no other options to deliver, but to increase revenue collection in the form of taxes through use of artificial intelligence (AI) and big data. It has to collect taxes from retailer, wholesales, agriculture and real estate sector.
The business community’s expectations are that the next government would udertake energy sector reforms to make the power affordable, instead of increasing energy tariffs to address the circular debt problem, he said.
The Pakistan Tahreek-e-Insaf (TPI) has given the plan in its manifesto to utilise surplus power generation capacity to reduce the power rate. It also said it would impose carbon tax to deal with climate change. “The PML-N says it would end the use of plastic to overcome climate change,” Malik said.
The PML-N has also said its government would merge the commerce ministry, Board of Investment (BoI) and the Customs and all would work under an economy ministry. The PPP said its government would work on the NFC award and that the province should contribute revenue for debt repayment and servicing.
