PBC suggests tough steps to manage economic crises

ISLAMABAD: Pakistan Business Council (PBC) met with Prime Minister Shehbaz Sharif on Friday and recommended some tough measures for managing the economic crisis, including taxing rental income and the real estate sector.

The PBC delegation led by its Chairman, Muhammed Aurangzeb, called for an honest acknowledgement of the crises and an effective communication campaign to get the public in on the need to conserve energy and adopt austerity.

This was not a time for “business-as-usual” he added “it was best to get the public to realise the extent of the crises so they adopt more responsible behaviour”.

PBC urged to prioritise securing and augmenting the IMF programme, followed by negotiations to significantly rephase bilateral and multilateral debt obligations.

It also urged for reforms in areas such as the National Finance Award; broadening of the tax base; resolving fundamental causes of the energy circular debt; reducing government expenditures; and curtailing SOE losses as well as expediting their privatisation.

Aurangzeb recommended the government to engage sovereign debt advisors for negotiating with foreign non-commercial lenders, and appreciated the finance minister’s insistence on timely repayment of the maturing Eurobond.

In the meeting with the PM, attended by the finance minister and key representatives of various ministries as well as the SBP governor, PBC presented ideas to create a $19 billion positive impact on the external account and raise over Rs1 trillion for the fiscal account.

Notable amongst these was switching power production to indigenous fuel and renewables. This could save the country nearly $5 billion of fuel imports.

PBC recommended rebates on exports of services similar to those on goods to attract $2.5 billion of undocumented exports. To narrow the spread between the official and open market exchange rate and to offer further incentive to exporters and overseas Pakistanis, it suggested allowing part of the export and remittance proceeds to be converted to “tradable import credits”.

“This would help balance demand for US$ with higher supply and help narrow the rate differential,” it suggested.

Other measures to manage the external account included tighter controls on leakage of dollars to Afghanistan, restricting use of credit cards for foreign payments to tax filers, raising the rate of return on Naya Pakistan Certificates, expediting the privatisation of the RLNG plants, limiting the work week and commercial hours, alternate day use of even/odd numbered cars, car-pooling and introducing daylight saving measures.

On the fiscal account, PBC called for austerity and cut back in public expenditure, revision of the petroleum development levy, bringing more of the retail, wholesale and real estate sectors into the tax base instead of burdening the already taxed, getting provinces to share the T&D and UFG losses as well as raising more revenue through property taxes.

It also asked for a concerted effort to apply Clause 7E tax on deemed rental income to those who have not declared their real estate assets.

The prime minister and finance minister welcomed PBC’s constructive recommendations and promised to have these evaluated for early implementation.

It was appreciated that PBC did not seek concessions and that its suggestions were for the national interest. The PM desired PBC to participate in working groups that were being formed to stabilise the economy.