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Business community pins high hopes on next govt for economic revival

Updated July 27, 2018

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The country’s trade deficit peaked at $37bn in FY18 as imports grew at unprecedented rate while the uptick in exports failed to keep pace.
The country’s trade deficit peaked at $37bn in FY18 as imports grew at unprecedented rate while the uptick in exports failed to keep pace.

KARACHI: Trade and industry leaders want the incoming new government to immediately address the precarious economic conditions by taking all stakeholders on board and coming up with an economic revitalisation plan.

Talking to Dawn, the leaders opined that rather than dependency on economic wizards with rhetoric theories, out of the box solutions are needed to deal with the situation.

“The foremost challenge for the incoming government is the economy,” said Federation of Pakistan Chambers of Commerce and Industry (FPCCI) Senior Vice-President Syed Mazhar Ali Nasir.

“The new government will have to work hard to stabilise the economy and FPCCI will put its share in this task if the government takes the private sector on board,” he said.

Managing the rupee-dollar position; ballooning trade deficit will be a tough task

He was of the opinion that many issues confronting the economy could not be resolved through traditional methods or rhetoric theories rather solutions based on ground realities would have to be taken.

Korangi Association of Trade and Industry (KATI) President Tariq Malik said the government should immediately adopt austerity measures and cut expenditures in order to reduce unnecessary burden on the national exchequer.

He stressed the new government must improve education system across the country and further stress upon technical education so that youth could impart such skills and can also run their own businesses.

“Once technical education is introduced at district level, the youth should be supported through microfinancing to run their businesses and workshops which could gradually be upgraded to small and medium enterprises,” he added.

Meanwhile, Chairman Pakistan Apparel Forum (PAF) Jawed Bilwani said that the biggest problem currently faced by the country is balance of trade and depleted foreign exchange reserves.

“The issue could be resolved in shortest possible time by removing the spread between bank rate and hawala margin as under invoicing would also be automatically checked. This would result in higher revenue collection at customs stage because importers will be forced to quote actual price. Moreover the government should introduce incentive scheme for people sending remittances through official channels as this will also discourage hawala,” he explained.

He stressed the new government wants to succeed in economic policies it should take the stakeholders on board.

“All ministries should be given targets to achieve on yearly basis and be appreciated and rewarded for meeting these goals. In order to make Federal Board of Revenue (FBR) vibrant, promotions should not be made on seniority basis but on performance as being done in private sector,” he said, adding: “The best would be to set up think tanks for each segment of trade and industry.”

Talking to Dawn, Chairman Karachi Wholesalers Grocers Association (KWGA), Anis Majeed said, “I think PTI’s coming into power will augur well for the country.”

“The most challenging task for Imran Khan would be to control the rupee-dollar parity,” he said, adding that managing rupee slide would help curb food inflation besides curtailing production cost of the local industries. “Khan has made big promises but change will only come after practical implementation of these measures,” he summed up.

However, General Secretary Karachi Retail Grocers Group (KRGG), Mohammad Farid Qureishi begged to differ and said, “Same old days have returned in Sindh as same old faces have returned. However, situation in other provinces may have been different where PTI has emerged triumphant.” “I hope for a better and safer Karachi as PTI has strengthened its position,” he added.

“Managing the rupee-dollar position and ballooning trade deficit will be a tough for PTI government,” feared Senior Vice Chairman Paapam Mohammad Ashraf Sheikh. He hoped Mr Khan would bring in a professional team to run the economy and go for pro-industry policies that can boost local production and exports.

General Secretary All City Tajir Ittehad and Chairman Traders Association Marriot Road Karachi, M. Ahmed Shamsi said, “In a big change, the people of Karachi has shifted their mandate to PTI and in return they now expect more from the winning party in resolving various crises like water scarcity, load shedding, education, poor health facilities, infrastructure and sewerage.”

He hoped that PTI leadership would take effective steps to bring stability in local currency so that prices of food items can come down. “I hope the economic health would improve under PTI leadership. Mr Khan must take some tariff measures in bringing down petrol and diesel prices.”

President Markazi Tanzeem Tajiran Khyber Pakhtunkhwa (KP) and Former President Sarhad Chamber of Commerce and Industry (SCCI), Sharafat Ali said PTI in the last five years in KP had not taken any steps for promotion of business and industrial activities.

“I do not foresee any remarkable change in the country and in KP economy under PTI. The first 100 days are crucial for the new government and it will give clear picture of new government’s performance,” he said.

General Secretary Anjuman Tajiran Pakistan Razak Babar hoped that corruption level at various state-run departments would come under strict vigil.

“PTI faces a serious challenge to bring back ailing economy on the growth track. This could only be possible with the selection of professional and competent economic team. The real challenge for PTI is to ensure rupee stability, bring down imports and boost exports,” he said.

Nabeel Khursheed of Top Line Securities said the newly elected Government’s first and foremost task would be to address the rising twin deficits and to introduce reform measures.

Pakistan’s external Current Account Deficit for FY18 came to $18 billion (5.8pc of GDP) up 43pc over FY17 CAD of $12.6bn. This was much higher than expectations and was partly financed through reserves, which declined by $6.3bn during FY18 to close at $9.8bn. He said other than the external account, the fiscal situation is also of concern as Pakistan fiscal deficit in FY18 is expected to be close to 7 per cent (compared to 5.8pc in FY17) due to lower than expected revenues.

The above rising trend does not bode well for Pakistan’s economic outlook. Conservative estimates place Pakistan’s external funding requirement next year to be at least $20bn. He believed that Pakistan would likely enter an IMF program in the next few months to address these rising deficits.

Mr Nabeel said that some of the reform measures adopted would likely include further currency devaluation (currency devalued by 20pc since Dec’17), further hike in interest rates (SBP increased policy rate by 175 basis points to 7.5pc in 2018), increase in tax rates, higher regulatory duties to curb imports, higher energy tariff to contain the circular debt and fiscal deficit, etc.

Mohammad Fawad Khan of BMA Capital said stabilisation of external account and controlling the fiscal deficit are the key challenges to the new government. Entry into the IMF programme appears inevitable, he added.

Published in Dawn, July 27th, 2018