Top trade leaders say economy to be a tough challenge for new govt

LAHORE:The government will face the tough economic challenges of bringing down the inflation, mark-up, industrial revival for job protection by reducing the utilities tariff, stiff fiscal and tax reforms to bring economic stability, alongside the IMF trap which is circling Pakistan’s economy.

There would not be any honeymoon period for the new government on economic challenges and it has to take unpopular decisions, against the announcements and commitments made during the election campaigns.

The business community of the country understands the economic challenges being faced by the country but pinning high hopes of political and economic stability with the general election going to be held on February 8.

Atif Sheikh, President Federation of Pakistan Chamber of Commerce and Industry (FPCCI) believed that February 8, general election will bring political stability in the country which will lead to economic revival.

Current political uncertainty is causing economic derailment. But the situation would be settled down with an elected democratic government. Presently no one knows who is running the government and trust deficit hurting the investment economy and businesses. Smooth completion of the election process is vital for the betterment of the country and the general public.

The new government will face the major challenges to economic revival due to high mark-up, import restrictions, banking issues in dealing of foreign exchange, and expanding the tax base. These challenges must be addressed on top priorities to streamline the local and foreign investments.

Group leader of Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) Ijaz Khokhar sees a transparent election is required for credibility which will lead to economic revival. Otherwise, economic chaos will increase more. Recently, US, Europe and human rights organisations raised questions on the Bangladesh election while Pakistan shall avoid such concerns. Furthermore, it would be important for the foreign independent observers and foreign media to cover the Pakistan election to increase its credibility.

Khokhar said the economy is already at its bottom ebb and it would be difficult to handle in the current IMF Trap. But the transparency of elections will resolve many issues, including revival of trust of public and investors in the elected government. Otherwise, the government would not be able to work with doubted elections. Recently, Pakistani exports started getting orders from foreign buyers but due to high utilities tariff making the price uncompetitive, besides the political uncertainty discouraging the producers to make decisions on orders.

The government needs to address some major issues, including inflation, business shrinking or closures, utilities tariffs, mark-up and foreign exchange availability for exporting sectors. Besides, it will need to focus on agriculture, IT, modernisation of textile sector, back-up supply chain for exporting sectors, global and local market need-based education and inclusion of stakeholders in timely decision makings. For all these, the government will need revenue which shall be through broadening the tax base instead of milking the existing taxpayers. Everyone shall pay their due taxes while a strong local government system shall evolve which assures the taxpayers that their taxes are spent on them. The trust deficit between taxpayers and tax collectors shall end through ending the unfair actions by the latter.

All Pakistan Textile Mills Association (APTMA) Chairman Kamran Arshad believed general elections might bring some political stability but a massive surgery is required for economic revival and stability. Country needs massive fiscal and tax reforms as the country could not run with only 5.5 million taxpayers out of 280 million population. Further, IMF sword is hanging on the country as Pakistan will need a USD8-10 billion package from it for which the new government needs to implement the Fund conditions of tax reforms, power sector reforms, privatisation of State Owned Enterprises (SOEs) which are annually causing almost Rs800 billion loss to the exchequer. On the other hand, the political parties are giving the false commitment of free and cheap power to people to get the mandate.

Arshad suggested Pakistan needs to prioritise the things to bring the country out of this crisis likewise India and Bangladesh. It is not a government job to do business. The government needs to focus on tax reforms, industry, trade, and agriculture. Further, there is a need to streamline the forex market as despite crackdown a parallel forex market of Hundi and Hawala is working while the country's forex reserves are only the reserved deposits of the friendly countries which could not be available for import to the businesses. There is a difficult bumpy road ahead for new government.

LCCI President Kashif Anwar believed that political stability brings economic stability. The February 8 general elections will definitely bring political stability in the country and end the political chaos. The world has to accept the credibility of the elections as everything is being done within the Constitution of Pakistan and within the framework of laws. Further, it is mandatory to hold elections within a timeframe. Pakistan has made commitments with international lenders, financial institutions, friends of Pakistan to hold elections and all of them will accept the election results.

Anwar mentioned that some major challenges would be faced by the government, including controlling the devaluation of the currency, utilities tariff, inflation, brain drain, revival of industry for jobs protection and focusing on agriculture alongside ensuring water availability to agriculture by building water reservoirs.

President Karachi Chamber of Commerce and Industry (KCCI) Iftikhar Ahmed Sheikh believed that economic stability comes with long-term democratically elected government. The government needs to evolve long-term policy by engaging the stakeholders from the chamber of commerce and industries.

Further, the government will face the issue of agriculture, economy and fiscal discipline which could be achieved if the Special Investment Facilitation Council (SIFC) which already has done basic work during the last eight months since its creation.