The Federation of Pakistan Chambers of Commerce & Industry’s (FPCCI) Businessmen Panel (BMP) has emphasized the need for serious reforms, cautioning that relying solely on extensive borrowing, including the recent $7 billion IMF deal, will not be enough to restore Pakistan’s economic health. BMP Chairman and former FPCCI president, Mian Anjum Nisar, called on the government to focus on long-term economic stability through sound management and reform efforts.
Nisar highlighted the rising cost of production, which is discouraging investment in Pakistan’s industrial capacity. He urged the authorities to undertake comprehensive economic reforms and improve the regulatory environment to enhance the Ease of Doing Business, which would attract foreign investment and ensure financial stability in the long run.
The BMP leader expressed concern over the heavy taxation on the power sector, which is burdening industries and making them less competitive globally. He also pointed out the continuous increase in power tariffs due to fuel adjustments, which is driving up electricity costs and exacerbating the already high expenses faced by businesses. Nisar advocated for energy tariffs that are comparable to global standards to help domestic industries compete internationally. He noted that high power rates have led to rampant electricity theft, as the tariffs are unaffordable for many consumers.
Pakistan recently secured a staff-level agreement with the IMF for a 37-month loan, its 25th IMF program since 1958. However, delays in final approval created uncertainty in the markets. Prime Minister Shehbaz Sharif, who is currently attending the United Nations General Assembly in New York, hailed the agreement and expressed the government’s commitment to implementing the necessary reforms. He also voiced hopes that this would be Pakistan’s last IMF program.
Economic analysts acknowledged that while Pakistan has achieved some stability following a period of volatility, much more needs to be done. The IMF agreement provides the government with short-term breathing space, but long-term improvement will require structural reforms that create fiscal space and address concerns about debt sustainability.
Pakistan’s debt, which is putting immense pressure on its $350 billion economy, requires $90 billion in repayments over the next three years. The next major payment is due in December. The country’s foreign reserves currently stand at $9.5 billion, enough to cover just over two months of imports.
Senior economists explained that the IMF loan is primarily intended to ease Pakistan’s debt repayments. However, relying on expensive borrowing from commercial banks and rolling over debt is not a sustainable solution to Pakistan’s financial challenges.
As of September 25, Pakistan owes over $6 billion to the IMF, making it the fifth-largest debtor after Argentina, Egypt, Ukraine, and Ecuador. Analysts argue that a major challenge for Pakistan will be building a broad political consensus around the reforms required by the IMF, which include raising energy tariffs, implementing taxes, and allowing market forces to determine the value of the Pakistani rupee.
Political stability will be a key factor in the success of these reforms. The IMF’s program includes measures such as eliminating provincial subsidies, taxing the agriculture sector, and pursuing privatization, all of which will require strong commitment from the various political parties ruling in different provinces.
Government policies, including artificially supporting the rupee’s value, coupled with the devastating floods of late 2022, pushed inflation to 38% by May 2023 and depleted foreign reserves to just $3 billion. Without addressing these underlying issues, analysts warn that Pakistan is likely to face continued economic instability. While the country has significant long-term potential, it remains untapped due to political divisions and the lack of a unified approach to reforms.
Mian Anjum Nisar also urged the Ministry of Power to identify system constraints and set clear targets for relevant departments in order to launch a concerted effort to upgrade the power transmission system. He called for the swift completion of ongoing power projects and the adoption of business-friendly policies similar to those implemented by neighboring countries to support economic growth.
