KARACHI: Pakistan has long grappled with political uncertainty, a challenge that has impeded its progress, placing the nation at a critical crossroads.
However, the upcoming general elections have sparked optimism within the business community, as they anticipate an end to uncertainty and a potential path toward economic rejuvenation, irrespective of the party or coalition that forms the government post-February 8.
Nevertheless, there is a prevailing concern among business leaders that a fragile coalition or hung parliament could exacerbate economic woes, lacking the necessary determination to tackle pressing issues head-on.
In interviews with The Express Tribune, Ehsan Malik, CEO of the Pakistan Business Council, and Anjum Nisar, former president of the Karachi Chamber of Commerce and Industry (KCCI), stressed the importance of securing a new IMF loan program as the current one concludes in March 2024, and restructuring the substantial existing debt. They argue that these steps are crucial to bolstering business confidence, stimulating economic activity, and fostering sustainable growth.
Both leaders cautioned that a weak government may face challenges in securing the new IMF program, potentially disrupting the economy if delays occur, just as it shows initial signs of stabilization.
“The foremost agenda for the incoming government should be securing a new IMF loan program, with debt restructuring as a secondary priority. These measures must be pursued concurrently to instill confidence in the business community,” Malik emphasized.
He noted that Pakistan still faces a shortfall of $6 billion to repay upcoming maturing debts, totaling $27-28 billion over the next two years. “An IMF program and debt restructuring can facilitate timely loan repayments, boosting business confidence and continuity.”
They also advocated for continuity in the policies of the current caretaker government, particularly the Special Investment Facilitation Council (SIFC) initiative, to sustain growth momentum.
Expressing uncertainty regarding the election outcome and government formation, Asif Inam, Chairman of the All Pakistan Textile Mills Association (APTMA), suggested that experienced politicians might maintain established practices, while newcomers may struggle to deliver results. He emphasized the importance of initiatives like SIFC in navigating the ongoing financial and economic challenges.
Nisar highlighted that while the elections and government formation may reduce political uncertainty, complete eradication is unlikely. He emphasized that securing the next IMF program and debt restructuring would provide the necessary confidence to the business community.
With Pakistan’s earnings primarily allocated to debt repayment and interest, leaving minimal resources for government spending on economic activities, fiscal discipline mandated under the IMF program is deemed crucial for sustainable growth.
“The focus should be on increasing export earnings, enhancing remittance inflows, and maintaining currency stability to spur economic growth,” Nisar suggested.
Furthermore, efforts to control inflation are essential to pave the way for interest rate cuts, which are currently at a record high of 22% since June 2023, hindering new investments and business growth.
Additionally, the government should work on reducing energy prices to enhance competitiveness in local and international markets.
To attract foreign investment, a strong government, effective business planning, policy consistency, political stability, and currency stability are imperative.
Recent discussions with Commerce Minister Gohar Ejaz revealed challenges faced by foreign investors in Pakistan, including rupee devaluation, inflation, high business costs, and increasing tax burdens.
Malik criticized leading political parties for not addressing tough decisions in their election manifestos, particularly regarding securing a new IMF loan program. He emphasized the necessity for the next government to continue restructuring the Federal Board of Revenue (FBR) to enhance revenue collection.
“The next government’s success hinges on increasing revenue through improved tax collection methods, leveraging artificial intelligence (AI) and big data. Energy sector reforms should prioritize affordability over tariff hikes to address circular debt,” Malik stated.
The business community expects the government to utilize surplus power generation capacity to reduce power rates and address climate change through measures like carbon taxation.
The PML-N and PPP have outlined their plans regarding commerce, investment, and revenue collection, signaling different approaches to economic governance.
In summary, the next government faces significant challenges but also opportunities to steer Pakistan towards economic stability and growth, contingent upon effective policy implementation and decisive action.
