Daily Times

The Federation of Pakistan Chambers of Commerce & Industry’s Businessmen Panel has called for keeping check on government expenditure and high cost of debt servicing to contain budget deficit, as the Pakistan’s federal budget deficit projection has been revised to history’s highest to over Rs4 trillion, highlighting the unending fiscal woes that have pushed the country into a debt trap despite putting additional burden of billions of rupees on industry in the current fiscal year.

The FPCCI former president and BMP chairman Mian Anjum Nisar has warned the high cost of doing business has been hurting the economic growth, hurting the trade and industry the most, which faced the brunt of a staggering increase in gas and power prices. The FPCCI former president said that the failure to reform the tax system is a major factor behind heavy domestic and foreign borrowings by the government.

Mian Anjum said that the most serious threat to the economy in the current fiscal year is high cost of production, because it is already hitting economy due to continuous raise in oil prices and depreciation of local currency. Quoting the Pakistan Bureau of Statistics, he said that the Consumer Price Index surged last month compared to a year ago. The increase was more than market expectations and has lessened the prospects for a cut in the interest rates, which stand at the country’s highest ever level.

This reading, the first announced by the PBS after the recently concluded International Monetary Fund talks, in which the global lender also cut the inflation forecast for Pakistan to single digit, may strengthen the IMF’s view of keeping the policy rate. He predicted that inflation would remain low and may even decline further due to market frictions caused by relative demand and supply gap of essential items, exchange rate depreciation and recent upward adjustment of administered prices of petrol and diesel.

Expressing serious concern over the high jump in country’s budget deficit, BMP chief said the revision has been made in light of agreement with the International Monetary Fund, which exposed the massive underreporting of expenditures at the time of budget presentation by the finance ministry. This is a highly unsustainable level and has already pushed the country into a situation where debt restructuring seems to be the only viable option. The PIAF and BMP leader maintained that the failure to reform the tax system and increase revenue collection is a major factor behind heavy domestic and foreign borrowings by the government.

Mian Anjum Nisar said that the privatization commission of Pakistan is struggling since months to effectively put in place the privatization of loss-making public sector enterprises; notably, the Pakistan Steel Mills and Pakistan International Airlines despite the urgency and concern expressed, time and again, by the IMF. The decision-making processes and any constitutional amendment are likely to be driven and influenced more by conflicting self-interests of the coalition partners, watering down the key objectives. This is not what the country needs in these unprecedented times of political and economic challenges confronting the nation. He observed that the most serious threat to the economy in the current fiscal year is high cost of production, because it is already hitting economy due to continuous raise in oil prices and depreciation of local currency. Quoting the Pakistan Bureau of Statistics, he said that the Consumer Price Index surged last month compared to a year ago. The increase was more than market expectations and has lessened the prospects for a cut in the interest rates, which stand at the country’s highest ever level.

Pakistan’s government liquidity and external vulnerability risks will remain very high until there is clarity on a credible longer-term financing plan.

It said Pakistan’s foreign exchange reserves remained normal now, sufficient to cover several months of imports and well above what was required to meet external financing needs for the next three to four years. Based on the IMF’s report published in January, Moody’s said Pakistan’s external financing needs were about $24 billion in the next fiscal year (Jul-Jun) 2024-25 and about $25 billion annually in fiscal 2026 and 2027. The country will need a longer-term financing plan to meet its very large financing needs for the next few years, after its current IMF program ends next year.