Incoming govt needs to set economic priorities as fiscal constraints an uphill task: BMP

Source: The Nation

ISLAMABAD - The Federation of Pakistan Chambers of Commerce and Industry's Businessmen Panel (BMP) has called upon politi­cal parties to announce clear and robust economic strate­gies, as the country has stuck in low economic growth situation, where double-digit policy rate for the last few years, includ­ing 22 percent policy rate, has diminished capacity to increase domestic production, and ex­ports, negatively impacting do­mestic resource mobilization.

The FPCCI former president and Businessmen Panel (BMP) Chairman Mian Anjum Nisar pointed out that the new strat­egies should not only focus on short-term gains but also en­compass a long-term vision for sustained progress. He empha­sised that such transparency from political leaders is crucial for instilling confidence in the business community and inves­tors. The BMP chairman said that the new government that comes into office will have its work sharply cut out as far as the economic challenges are concerned. Coming at the back of fast-unfolding climate change crisis and recent COVID pan­demic that pushed millions into poverty with little fiscal capacity of government to provide any­where near close to what was needed in stimulus spending. Then there is acute debt distress, and seriously high inflation at the back of global aggregate sup­ply shock, and accentuated by a world of rising conflicts, mainly in Ukraine, and the Middle East.

Mian Anjum Nisar said that even though Pakistan's eco­nomic crisis in 2022-2023 is a recurring factor in the coun­try's political unrest, it has a history of ignoring the nation's true issues, which include poor governance, a broken judicial system, outdated laws, compli­cated tax system, lack of trans­parency, duplication in the government system, ineffective bureaucracy, improper use of our human, natural and water resources, lack of efficient lo­cal government, inadequate/unreliable data for country's planning, and the consistent flaws in policies in execution by the government departments. Pakistan's GDP growth rate has always remained below its po­tential despite efforts to boost economic growth. The develop­ment of important sectors and investment prospects was ham­pered by inadequate revenue collection, structural problems, and governance issues. Since it has been causing serious gover­nance and economic issues for years, the cost of goods, food, petrol, and other necessities has increased, and inflation has al­most reached 45 percent, which is not bearable for the common man. On the other hand, there has been an increase in dissatis­faction among the public that no state institution is performing well and to save them from the haughtiness and bad adminis­tration pervasive in the system. The only way for this to go from a failure to a success story, as in other countries, is if the federal and provincial governments defy them and pursue funda­mental changes in governance, fairness, openness, accountabil­ity, and the consistent economic policies minimum for 15 years.

Other troubling issues also exist, posing obstacles to our economy's expansion. Pakistan is ranked 173rd internationally for tax payments. According to a World Bank analysis, Paki­stani businesspeople pay 47 taxes yearly, compared to those of Hong Kong, the United Arab Emirates, Ireland, Malaysia, Sri Lanka, and India, which are the countries with whom Pakistan must compete. A single busi­ness that conducts business in four different Pakistani prov­inces annually disburses five corporate income taxes, twelve employer-paid pension contri­butions, twelve Social Security payments, one property tax, one professional tax, one vehicle tax, one stamp duty payment, one fuel tax payment, and twelve payments of goods and sales tax. An exporter needs 75 hours to complete border compliance and document compliance. Ad­ditionally, Pakistan dropped 23 spots on the indicator for corpo­rate loan availability. The nation was ranked 105th this year as opposed to 82nd last year. There wasn't much money left to fund the company's expansion be­cause of the government's ex­panding budget financing re­quirements. Pakistan's Human Development Index as of 2022 is 0.544, placing it 161st out of 192 nations. The HDI of Paki­stan is among the lowest in Asia, right below Yemen and Afghani­stan. The country dropped one spot, moving to positions 142 and 170 on the indices for reg­istering businesses and prop­erties, respectively. There are 12 different treatments, and it takes roughly 18 days to fin­ish them all. Similarly to that, it took many days to register a property. The nation climbed nine spots in the rating for han­dling building permits, landing at position 141. It takes an in­vestor 252 days to complete 15 different types of procedures to obtain a building permit.

The country has had trouble raising enough money to cover its expenses. Due to the low tax-to-GDP ratio, borrowing and out­side help are heavily relied upon to close the fiscal imbalance. In Pakistan, there is a recur­ring budget deficit because the government spends more than it takes in. The national debt burden has risen, as a result, needing substantial financial resources for debt repayment. Both internal and external debt in Pakistan has been constantly rising. The budget is largely con­sumed by debt servicing; leaving little money for social welfare and development initiatives. Circular debt, which is the accu­mulation of unpaid invoices and pending payments among pow­er generation firms, distribution companies, and the government, is a problem in Pakistan's energy sector. This problem has a sig­nificant negative impact on the power sector's finances and hin­ders its ability to meet the rising energy demand.