Anjum Nisar says high cost of doing business dangerous for trade and industry

Anjum Nisar says high cost of doing business dangerous for trade and industry

ISLAMABAD, APR 21 /DNA/ – 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.

With a view to deal with fiscal challenges he asked the economic managers to work on the three-way strategy by implementing short-term goals that will help to keep generating resources for smooth fiscal operations, medium-term goals where the they should focus on financial inclusion, documenting the economy by designing a system where all businesses can be registered and properly document their income including collection of sales tax, initiating the process of priva­tisation as well as improving governance by introducing reforms in each sector. As a long-term goal, the country must focus on improving its human capital, and revamping IT sectors by extending facilitations and providing all the requisite supports. In the same way, we also need to work on designing a comprehensive and proactive strategy to tackle challenges related to strengthening border security and implementing effective and comprehensive Anti-Money Laundering and Terrorist Financing measures holding accountable and taking to task all those who are in­volved in illegitimate activities, undermining both our economy and national interests. He stated that the significant jump in electricity prices and hike in gas tariffs to meet the IMF condition will put additional burden of billions of rupee on consumers. He observed that it is unfortunate that the authorities in all governments continued to approve billions of rupees’ additional burden on consumers through a direct tariff increase and an indirect increase through the withdrawal of subsidies given to exporters and farmers earlier.

In its monthly report on Foreign Economic Assistance, the Economic Affairs Division said against its annual target of $17.6 billion, total FEA in the July-Dec amounted to $3.52 billion when compared to just $2.24 billion of the same period last year, an increase of 58 percent.