Difficult times ahead as debt servicing to go up 35pc: Pasha

LAHORE: Former finance minister of Pakistan, Dr Hafeez Pasha on Tuesday warned of the difficult times ahead, as the country witnessed the highest single-month import figure of $6.3 billion in June 2020, while the current account deficit remained $1.3 billion in this period.

Addressing an economic session on “Pakistan Economy-Challenges and Solution” organised by the Pakistan Industrial and Traders Association Front (PIAF), he predicted that the total annual import figure would go as high as $70 billion, which would be impossible to manage with exports of just $25 billion.

The ceremony was also addressed by Federation of Pakistan Chambers of Commerce and Industry (FPCCI) former president Mian Anjum Nisar, PIAF Chairman Mian Nauman Kabir and senior journalist Sikandar Lodhi.

Dr Pasha pointed out that next year, the current account deficit would surpass the figure of $6.7 billion, as the country would have to enhance payment in its debt servicing by at least 35 percent, which was alarming.

He appreciated the record remittances of $29.4 billion sent by overseas Pakistanis, but said these remittances would erode next year when people started travelling again. Pakistan spends around $3-4 billion annually on foreign travels, which were saved this year, lifting the figure of remittances.

Dr Pasha, during a question-answer session stated that another National Action Plan should be initiated that was launched against terrorism. The Pakistan Army was successful in eradicating terrorism from the country, but it was re-emerging now, and incidences of violence were rising in Balochistan, while the recent blast in Lahore was also horrifying.

He called Pakistanis a resilient nation for approaching the International Monetary Fund (IMF), 22 times in 74 years. Despite that, he said “our economy never collapsed”.

He added that the nation remained successful in all kinds of crisis, but this success story has not been sustainable for the long-term. “When I was the finance minister, the US ambassador warned me that he would stop the USAID fund for Pakistan because I was promoting Pakistani products and trade,” he recalled.

He stressed the need for at least a seven percent GDP growth rate to absorb the large number of unemployed youth, eradicate poverty and to manage the rising public debt. For this purpose, the country needs an equitable taxation system and high growth in exports, he added.

Dr Pasha also raised objection over the calculation of GDP growth figures and said that last fiscal year, growth was reported as minus 0.47 percent, but actually it had dropped to negative two percent because of massive contraction in the economy.

He said that the Pakistan Bureau of Statistics needs to be strengthened, so they could calculate official figures accurately.

He said that our industry contributes more than 70 percent in tax revenue, as the industrial sector gave almost Rs3.5 trillion in taxes in various forms. On the contrary, the Rs25 trillion real estate sector paid just 12 billion in taxes, which was totally unjust.

In the same way, 22 percent agriculture land which was owned by just one percent of the landed elite, shared only Rs2.5 billion in tax revenue.

Dr Pasha also announced the launch of his new book “The Charter of Economy” from the platform of PIAF.

Former president of the FPCCI, Mian Anjum Nisar in his address asked the authorities to focus on accelerating exports, besides keeping some check on unbridled imports of luxury items. “The economic managers will have to chalk out a long-term plan for import substitution and increasing exports so that Pakistan becomes self-reliant.” He also emphasised the need for adoption of international best practices for priority sectors and consultations with international experts to achieve success.

PIAF Chairman Mian Nauman Kabir said fiscal sustainability has become a major issue for Pakistan’s economy, as its servicing debt accounts for more than one-third of its federal budget. “Pakistan’s trade deficit keeps on widening despite a much-trumpeted increase in exports, which were, in fact, not sufficient to match the huge surge in imports.”

He said the government has spent Rs3.06 trillion on interest payments, while spending only Rs600 billion on subsidies and Rs100 billion on Covid-19 vaccinations. “Pakistan's reliance on debt is a violation of the country's Debt Limitation Act.” He said the low exports volume and rising trade deficit were chronic issues, which should be resolved permanently.