KARACHI: The Pakistan Businesses Forum (PBF) says the country is facing a serious economic challenge daily with an unprecedented loss in value of our currency against the dollar.
Prime Minister Shehbaz Sharif should immediately activate the National Economic Council on the model of the NCOC and on board all political parties, he said, adding that the heads of the services of the armed forces should also be part of it, in order to make day-to-day decisions regarding the Pakistani economy. “It’s now and never. It must be understood that the survival of the economy is imperative.
PBF Senior Vice President Muhammad Riaz Khattak said Pakistan’s economy is now ungovernable and unfortunately major political parties have yet to come up with a ready-made solution to effectively manage the economy from the country. Every government comes in to contract new loans and impose new taxes on the public.
He said reliance on domestic and foreign borrowing and bailouts has pushed Pakistan into a classic debt trap where more borrowing has to be done to pay off old debt. It also left the country living from one IMF tranche to another.
“Furthermore, it is now a style of every new government to come to power and hold a first press conference and state an identical line that the country is on the brink of financial default.” It is time for the government to start buying gold, he suggested.
PBF Vice President Ahmad Jawad asked where are we heading? The country’s debt to GDP stood at an alarming 70%; From August 2018 to date, the depreciation of the Rupee was the highest in our 75 years of independence.
The rupee fell by Rs 107, an unprecedented drop; never witnessed such a depreciation in any other country. Private banks open L/Cs at the rate of 242 and above for oil companies.
He said the government could no longer sit idle and let the rupee sink; dollar against rupee spirals out of control worth Rs 229.88 as on July 25th. This is the height of government indecision.
If the dollar is not contained, oil and electricity prices could rise further and reach unsustainable levels.
“We underestimated the gravity of the crisis and its complexities. Now it seems to be spiraling out of control. The Free Float policy must be recalled”.
Criticizing finance ministers for their so-called “difficult decisions”, Jawad said they just pass everything on to the public.
Whereas the rentier ruling elite has created a rentier economy. This is why the structural sources of the country’s chronic financial imbalances have remained unaddressed: a narrow and unfair tax system, the circular debt of the energy sector, bankrupt public enterprises, a failing public financial management system, an overvalued exchange rate, a heavy regulatory burden and a narrow export base, he said in his scathing remarks.
He also demanded a cut in the benchmark interest rate, which was raised to 15%, to save the economy from trouble. This increase would affect the declining growth of business activities and cause a further collapse of the economy.
The PBF vice president said the benchmark interest rate in Malaysia was 2.25%, Indonesia 3.5%, China 3.7%, Bangladesh 4.75% and India by 4.9%, but it was 15% in Pakistan and it was not possible for the private sector to compete effectively to promote trade and exports.
He may also note that the Indian central bank is ready to spend another $100 billion to defend the rupee, but we have no such option.
While India is ready to sell a sixth of its foreign exchange reserves to defend the rupiah against rapid depreciation after hitting record highs in recent weeks.
The rupee has lost more than 7% of its value in 2022 and has weakened beyond the psychological level of 80 per US dollar.
Copyright Business Recorder, 2022