The business community has welcomed the signing of a nine-month, $3 billion standby agreement with the International Monetary Fund (IMF), hoping that the deal will end uncertainty and restore confidence among local and foreign investors. will do which is badly needed to revive the economy.
Zubair Motiwala, chairman of the Businessmen’s Group (BMG), while talking to Dawn, said that the staff-level agreement would restore the confidence of foreign investors as well as bring economic stability, in terms of rupee and dollar. It will have a positive impact on the stock market by stabilizing the gap.
However, he expressed concern that the IMF’s bailout program may increase the cost of production, which the entire business community is afraid of and the government should pay special attention to address this concern.
Zubair Motiwala added, “I hope the US dollar will come down to its real value, thereby helping to control food inflation while also bringing down interest rates.”
He said that after the staff level agreement, the money coming from friendly countries and multilateral donor countries will provide some space to the government financially.
He said that this fiscal space should be used to see that our trade account expands in such a way as to maintain the balance of payments and exports of the country.
He said that we should focus on bringing in maximum remittances, increasing exports and making exports viable by bringing production costs and business costs at par with our regional competitors.
Zubair Motiwala emphasized on promoting industrial activities and said that efforts should be made to ensure speedy refund of duty drawback of sales tax and local taxes and levies.
Pakistan Business Council Chief Executive Ehsan Malik said that the staff-level agreement to bridge the liquidity gap is welcome and after its phase-out, the government will be held accountable within the guidelines set by the IMF. One should stay on the path.
However, what is surprising is that the IMF believes that the budget has broadened the tax base when it has not, with existing taxpayers, including salaried employees, being further broadened at higher rates. Taxes are levied and non- or under-paying retail, wholesale and real estate owners are largely left out.
He said the industry would also have to bear the brunt of higher energy tariffs and this is done on the assumption that higher rates are a sustainable solution to distribution losses, pilferage and low recovery which are the root causes of circular debt, IM. There has been no substantial demand from F. to stop it due to government losses, and surprisingly, imports are expected to ease, eventually to the tune of $3.5 billion. How is all this possible with foreign exchange?
Ehsan Malik said that industry in the formal sector would definitely suffer from higher policy rates, though he knew that policy rates were not the right solution to curb cost-push inflation.
“The industry will continue to face pressure from all sides and we are slowly killing the hen that lays the golden egg,” he said.
He said the standby credit increases the risk of default, with the $3 billion facility not taking care of more than $20 billion needed to service external debt over the next 12 months.
