PIAF wants steps as economy faces low growth, high domestic debt

Islamabad
The Pakistan Industrial & Traders Association Front (PIAF) has said that the economy is stuck in low growth trap with poor human development outcome and increasing poverty, as economic conditions leave Pakistan highly vulnerable to climate shocks with insufficient public resources to finance development and that international experience suggests that domestic debt re-profiling did not always work unless associated with sharp and sustained structural reforms identified over four decades ago but remain pending to this day.
PIAF Chairman Faheemur Rehman Saigol in a joint statement along with senior vice chairman Nasrullah Mughal and vice chairman Tahir Manzoor Chaudhary, while referring to a report, observed that business community has long been urging the government to reform the power sector, since decades ago when circular debt was in millions of rupees which today is a whop trillions of rupees, to reform the tax structure that continues to rely heavily on indirect taxes whose incidence on the poor is greater than on the rich, a major contributory factor in poverty levels reaching a high of 40 percent today, to continuing the policy of steadily raising the budgeted current expenditure, thereby shrinking the available fiscal space annually and, last but not least, warning the government of an impending water scarcity decades ago that went unheeded resulting in the country’s current status of a water-stressed country.
Nasrullah Mughal advised the government to look at the bigger picture while cautioning domestic stakeholders that creation of a new institution that envisages billions of dollars of investment inflows backed by pledges may not provide a quick fix of the economy.
This is not to undermine the concerted ongoing efforts to make Pakistan an attractive destination for foreign investment but to emphasise the fact that basic economic theory dictates that foreign investment would flow into those countries where the economy is strong, growth is projected to rise and key macroeconomic fundamentals, including foreign exchange reserves, are more than sufficient to forestall the possibility of inability to meet the import bill, which includes basic inputs/essentials for industry as well as the householder.
Tahir Manzoor Chaudhary said that structural reforms are therefore the way forward and until and unless the administration supplements its crackdown with these reforms that are minutely identified in reports but continue gathering dust in all relevant ministries, the situation is unlikely to lead to sustainable long-term improvement.
Faheemur Rehman Saigol said that the government is forced to borrow from the domestic and external resources to finance the fiscal deficit as the country’s tax revenue collection is insufficient to meet the expenditures. While, in absence of external financing the government is completely dependent on domestic borrowing, of which domestic debt stocks are sharply increasing.
The PIAF leaders noted some home truths about the steady regression of key macroeconomic indicators due to resistance and reluctance to implement the necessary reforms by civilian and military dispensations that, in his words, accounts for the worst ever economic crisis in the country today.
There is no doubt that the crackdown against multiple market players – the speculators in the foreign exchange market, consumers engaged in electricity theft and smugglers of essential commodities, has yielded significantly positive results.
He called upon the government to announce clear and robust economic strategies, as the country has stuck in low economic growth situation.