Call for temporary relief measures amid economic challenges

The Corporate sector, including big bankers and brokers, welcomed the International Monetary Fund’s (IMF) endorsement of a $7 billion package. Small businesses, traders, and civil society, however, expressed apprehensions over the servicing of ever-increasing debt, probable misallocations, and the implementations of IMF-directed policies at the cost of micro businesses, women, and the youth.

Ehsan Malik, of the Pakistan Business Council, refers to the 25th Extended Fund Facility as “a route that provides solvency and liquidity to address root economic flaws”. He goes on to say that the system will not find it easy to implement effective reforms for the simple reason that it has enough burden in the shape of the formal sector and high taxpayers rather than a broader tax base. He said that easing inflation and increased remittances may help alleviate the economy’s problem but unless there are signs of demand recovery, it would remain a challenge to achieve tax targets.

Malik stressed privatization of Pakistan International Airlines and the need to expand the tax net to include traders, transporters, and the real estate sectors. He doubted whether these current proposals under IMF would reduce the cost of energy but pointed out that the package imposed taxation on agriculture for which the provinces are not too enthusiastic.

Businessman and Patron-in-Chief at the Pakistan Textile Exporters Association Khurram Mukhtar concurred that government debt seemed to rest squarely on public shoulders. While our economic fundamentals are improving, our ultimate goal should be to achieve a trade surplus and totally overhaul governance.

Malik Mehr Illahi, president of the Khyber Pakhtunkhwa Traders Union, said the deal was needed but expressed skepticism over whether the money would be well spent. The government is implementing the wrong approach as it has introduced excessive tax rates on traders’ assets rather than actual income.

Yousuf Haroon Pl after serving as a federal secretary became Chairman of the Policy Research and Advisory Council at the Karachi Chamber of Commerce and Industry, said that an IMF program seems to give relief for sometime but does not have a sustainable economic approach in it. He further observed that if structural weaknesses are not addressed, such packages might create damaging revenue measures, as is evident from other countries facing similar problems.

M Abdul Aleem, Secretary General of the Overseas Chamber of Commerce and Industry, said he welcomed the deal reached with the IMF, because he believes it would build confidence among local and foreign stakeholders. “Reduction in inflationary pressure and interest rates, boosting tax revenues and selling off loss-incurring state-owned enterprises are issues that have to be taken care of for changing investor sentiment,” he said.

Arif Habib of Arif Habib Group believes that in general, the deal achieved by IMF will further improve the financial stability and liquidity of the banking system to allow greater ease of credit access to firms. If inflation were brought under control, then consumer purchasing power would be restored along with demand, giving reforms the structural dimension required for the environment created to be much better for business.

Former director of the Aurat Foundation Mehmaz Rahman criticized the government’s “dependent behavior on borrowing from multilateral donors” and urged the state to try and reduce wasteful spending and improve governance as means to better serve the populace.

Shahid Sattar, secretary general of the All Pakistan Textile Mills Association (APTMA),  welcomed the $7 billion loan provided by the IMF but said much of the challenge faced by exporters still continued. “The removal of sales tax exemptions for local supplies hurt export manufacturing because imports remain tax-free and that marginally threatens the competitiveness of domestic firms,” he said.

Only financial inclusion plans will be worthwhile with the IMF package, opined Dr. Muhammad Amjad Saqib, founder, and Executive Director of Akhuwat Foundation. He was very clear in his opinion on microfinance and targeted support to small businesses, agriculture, housing, and renewable energy to empower the poor and foster economic growth.