Daily Times

The Federation of Pakistan Chambers of Commerce and Industry’s (FPCCI) Businessmen Panel (BMP) has said that the nonstop debt growth carries significant fiscal costs and exposes the country to huge debt vulnerabilities. FPCCI former president and Businessmen Panel Chairman Mian Anjum Nisar emphasized that persistent fiscal deficits and debt repayments have resulted in consistently high annual gross financing needs, averaging 28 percent of the GDP over the past decade. This level is notably higher than the emerging market threshold of 15 percent. The leader of the BMP said that in the past two decades, Pakistan has witnessed two consecutive years of the highest budget deficits in 2023 and 2024. He pointed out that for the current fiscal year, a budget deficit of 7.7 percent of the GDP is anticipated, a staggering Rs1.3 trillion above the government’s target. He expressed concerns over these persistent large budget shortfalls, which have led to the rapid accumulation of public debt. This, in turn, has crowded out private investment and contributed to macroeconomic volatility. Referring to the SBP data, he unveiled an alarming 39 percent increase in the external debt of the federal government, reaching Rs24.2 trillion within a year. A substantial Rs6.7 trillion increase in external debt was primarily attrib­uted to currency depreciation. As of Feb 2024, external debt stood at Rs17.6 trillion, excluding the International Monetary Fund (IMF)’s liabilities. Out of the total external public debt of $85.12 billion, the government owed $62 billion to multilateral and bilateral development partners including IMF which meant more than two-thirds (i.e.75 percent) of the total external public debt was on concessional terms with a longer maturity, 16pc (i.e. $13.5 billion) from international capital markets and foreign commercial banks. Mian Anjum Nisar said that this unsettling trend has raised concerns about fiscal sustainability and the adverse impacts of steep currency devaluation come at a time when the World Bank has cautioned Pakistan about the growing risks of its macroeconomic framework. For the past one and half year, the country is facing a serious financial crunch and continually relying on borrowing to meet its financial needs. FPCCI former president and Businessmen Panel chairman said that high cost of doing business has proved to be dangerous for businesses, as ever-increasing cost of production is the real threat to the economy amidst frequent upward revisions in policy rate and continuous fluctuations in rupee against dollar. Mian Anjum Nisar said that the government liquidity and external vulnerability risks are elevated and there remain considerable risks around to secure required financing to fully meet its needs for the next few years. He said that constant hike in power tariff has pushed the electricity prices higher and added to the already soaring cost of trade and industry. He asked the government to shut down all expensive oil-based power plants to ensure availability of cheaper energy for consumers. He condemned the government for shifting power distribution companies’ inefficiencies’ burden to the consumers by jacking up the tariff under the guise of Fuel Charges Adjustment. He observed that the aggressive economic measures, high borrowing rates, inflation, op­pressive taxation and unstable currency have been negatively affecting running businesses.