Hopes of an economic revival

November 26, 2023

Stakes are high for the PML-N. It must bring about an economic revival if it wins the upcoming elections

Hopes of an economic revival


he political arena is abuzz with speculation that the three-time former prime minister Nawaz Sharif is set to win a majority of seats in the upcoming general elections and form the next government.

The business community has reacted positively to the possibility of Nawaz Sharif taking the reins. Flanked by his close associates, including Ishaq Dar, Shahbaz Sharif and Maryam Nawaz, he had recently visited the Lahore Chamber of Commerce and Industry.

Ishaq Dar, who has served as LCCI president, understands the importance of the platform. It is expected that the PML-N leadership will hold more such meetings in the near future to get the pulse of the economy and to enlist support of the business community.

Such meetings are important for political parties as they help them chalk out their economic plans and include those plans in their election manifesto. The challenges are daunting for whichever party makes the next government. An IMF programme with tough pre-conditions is already in place, the exchange rate has been unstable for nearly two years, the trade deficit has been widening and the utility prices have been rising.

Many businesses have pinned their hopes on the PML-N on account of its record, especially its performance during 2013-18 when the country was facing a huge energy crisis.

Once again, the country is in troubled waters and long-term policy measures are needed to revive the economy.

Ijaz Khokhar, a board member of the International Apparel Federation, says that exports by business in all the major cities have witnessed a 20-25 percent decline. “The exports and businesses are declining and not entirely due to the political uncertainty. Several factors are hampering the economic activity in Pakistan.”

He says that the Ukraine-Russia war has adversely affected the export orders as buyers in Europe are only ordering essential products.

“The exchange rate fluctuations are another important factor in declining exports. The buyers ask for a one-year price while Pakistani producers are unable to quote a one-year price due to continuously increasing costs.”

Some other global suppliers are able meanwhile to quote prices for up to three years since they have stable exchange rate and utility costs. Pakistani suppliers are unable to calculate the cost of electricity and predict the exchange rate.

Working capital running into billions of rupees is stuck with the Federal Board of Revenue. The exporters are finding it hard to manage using bank loans as mark-up rates are as high as 22 percent.

Inconsistency in government policies, including non-implementation of the Textile Policy 2020-25, have also affected the country’s exports.

Some exporters warn that different rates of gas for the Punjab and Sindh will hurt competition and ultimately result in lower overall exports.

Inconsistent government policies, including non-implementation of the Textile Policy 2020-25, have also affected the exports. The exports went down from $31 billion to $27 billion and are anticipated to decline further to $25 billion this year.

Khokhar says industrial sustainability alone can drive economic growth in the country. But how will that be achieved? He says “the PML-N has a track record of bringing about economic recovery but in the current situation it will take at least two years for any government to take the country out of the crisis by reducing the trade deficit.”

Foreign direct investment can play an important role but when local investors are not investing how can foreigners be expected to do so, he asks.

“There is a need to restore the confidence of the overseas Pakistanis to increase the inflow of remittances through official channels,” he says. The remittances shifted to hundi with the exchange rate fluctuations and the huge difference between the inter-bank and open market rates.

Yawar Irfan, a member of the Board of Investment, says that the chances of PML-N coming to power seem bright at the moment. “Many business houses are in the mood for investment. They know that in the past the PML-N has pursued trade-friendly policies. It is again expected to reform the infrastructure, energy, communications and aviation sectors.”

The businesses are optimistic due to what they remember about the PML-N governments.

Irfan, who has also been an LCCI president, says that solid, reasonable and constitutionally supported long-term policies are needed. Otherwise, he says, economic stability will remain elusive.

The people of Pakistan have suffered a lot in recent times due to the unstable exchange rate. Those bringing foreign exchange to the country shall be encouraged.

The real estate sector is also looking forward to the new government. Major players in the automotive industry are looking to establish new plants and facilities. Traders, particularly in the retail sector, are hoping for an improvement in the law and order situation. The new government will also need to find sustainable solutions to make energy and power prices affordable.

“The exporters have a huge stake in the country. Their contribution to the national economy must be acknowledged. Lahore urgently needs another airport terminal. We hope that the PML-N team, led by Nawaz Sharif, will pay serious attention to these issues and bring the economy back on track,” Irfan adds.

The writer is a commerce reporter at The News International

Hopes of an economic revival