Islamabad, October 21, 2016: “Amid reports of falling exports, remittances and FDI, the news of ballooning external and domestic debt and parochialisation of national institutions like the State Bank of Pakistan, has unleashed a wave of concern among key economic stakeholders in Pakistan,” said Vice President PPPP, Senator Sherry Rehman.
Raising concerns on Pakistan’s persistently falling exports, remittances, FDI and skyrocketing debt, Vice President PPPP said, “We need to work on a war-footing to recover from the economic slide”.
The Senator also showed concern over the federal government’s decision to move key departments of the State Bank of Pakistan from Karachi to Lahore, calling it “Punjabisation of Pakistan”. Rehman added that strategic institutions like SBP should not be used for political gains.
Vice President PPPP further added that the current government has already taken massive loans from the IMF. Now it has added more debt to its stockpile by floating $1 billion bonds in the international debt market.
“According to recent estimates from the SBP, Pakistan would be paying around $5 billion each year in foreign debt servicing until 2021,” she added.
This borrowing is taking place at a time when the country’s external accounts are already under extreme pressure and there is fresh uncertainty about the future of low oil prices.
“How will we repay all these debts?” questioned the Senator.
Rehman also criticised the government over staging fake awards on performance. The Ministry of Finance and the Ministry of Planning and Development both claimed that ‘Emerging Markets’ is a World Bank and IMF publication.
However, the IMF denied its affiliation with the publication. Five Pakistani state-owned enterprises funded the ‘Emerging Markets’ edition that carried a supplement on Pakistan. “The federal government is practically buying their own laurels to cover-up their dismissal performance,” said Rehman.
She denounced the Prime Minister’s recent claims of making electricity cheaper. According to IMF’s recent report, the cost of electricity to consumers has gone up by 35 percent.
The Senator further stated that the current government is on a stream of indirect taxation. “The influx of heavy indirect taxation by the government is making our exports costlier and therefore less cost-competitive in the global market,” said Rehman.
“Furthermore, these taxes have disrupted investment and the business climate by imposing more taxes on the already taxed formal sector, “the Senator added.
Rehman added that the tax amnesty schemes to traders have failed to achieve the desired goals. Pakistan’s tax capacity is 22.3 percent of GDP while it is collecting only 11 percent.
Moreover, the losses incurred by three major public sector entities (PSEs) — the Pakistan International Airlines, Pakistan Railways and Pakistan Steel Mills — and the debt of power sector companies has risen to Rs.1.365 trillion, which is higher than the consolidated Annual Development Programme of Rs.1.25 trillion in the current fiscal year.
In addition to that, there is piling debt in the import of Re-gasified Liquefied Natural Gas (RLNG) that stands at Rs.12 billion currently.
“What practical steps has the government taken to manage the economic crisis?” questioned Rehman.
“Where is the much touted Strategic Trade Policy Framework? Even the EXIM bank of Pakistan is not operational yet, “she pointed out.
Experts also say that the government has artificially appreciated the currency as it eases the external debt burden. Doing so has a negative effect on our exports ad they become more expensive.
“Rather than strengthening and improving critical economic areas, the government is focusing solely on ways to generate revenue without taking into account the serious fallout of such a move,” said the Senator.
Independent economists and analysts believe foreign investment is falling because the government has failed to improve the country’s image in the world.
Exports and FDI have been falling ever since the current government came into power.
The export figures have come down 8.2 percent, from $25.1 billion in 2012-13 to $20.8 billion in 2015-16. FDI declined by 38 percent year-on-year in the first quarter of 2016-17.
Additionally, the current account deficit ballooned by 136 percent year-on-year during the first quarter of this fiscal year.
On top of that, remittances fell by 5.3 percent in the first three months of the current fiscal year compared to the same period of preceding year.
“The falling trajectory of our economy should immediately raise a red flag for the government,” she exclaimed.
Rehman pointed out that the trade deficit could have been much higher if the oil price were at the level where they were two years ago.
“Pakistan saved $7 billion in oil imports during the previous years, “said the Senator.
Oil prices have plunged from well over $100 a barrel in mid-2014, falling below $30 a barrel at the start of this year before recovering to the $40-50 range at present.
Rehman said that global recession cannot be completely blamed for the state of our economy.
“The slide in exports could be attributed to reducing global demand but the fact is that India and Bangladesh are still in the game. The taxes, the exchange rate and the cost of production make our exports uncompetitive,” she added.
“The government needs to put its house in order and start finding solutions for improving the state of the economy. All economic indicators of the country show a worrying, downward trend,” she concluded.