January 07, 2023 (MLN): Cash-strapped Pakistan is severely affected by the melting foreign exchange reserves which stood at historically low level. Thus, to anchor this dilemma, Pakistan Business Council (PBS), the advocacy body of Pakistan’s largest private-sector businesses stressed the need to secure immediate liquidity by expediting/ enhancing the current IMF program by factoring the impact of floods.
Council has acknowledged that whilst the IMF program is critical to restoring the confidence of friendly nations to provide assistance, in itself, the IMF program is not sufficient to meet debt obligations unless they are significantly restructured, nor provide the space to implement fundamental reforms.
This is why, the body in its detailed proposal, also asked the government to seek forgiveness of principal/interest on the debt by China, the Paris Club, and bilateral and multilateral lenders.
“We recommend Pakistan, like other debt-distressed countries, obtains professional advice from sovereign debt advisors on restructuring and extending the debt payment terms and the cost of servicing it,” PBC stated.
There is growing global recognition of the need for debt waivers. Thus, buy time for fundamental reforms by restructuring non-commercial foreign debts and by extending the current or negotiating a fresh IMF program.
In addition, the government should clearly convey the seriousness of the economic crises to the public instead of denying the default risk. To resolve such challenges, Islamabad should motivate the public to conserve energy through effective communication.
PBC stressed the need for the government’s set an example in conservation by adopting an austerity program.
Moreover, the body called for develop cross-party consensus on fundamental reforms such as the renegotiation of the 7th National Finance Awards, broadening the tax base, resolving fundamental causes of the energy circular debt, credible reduction in government expenditures, curtailing SOE losses, and expediting privatization.
PBC has proposed a Pakistan Economic Reforms Programme and would like to get the parties around a table to agree on a minimum consensus.
Pakistan’s external debt servicing obligation for FY23 is $23 billion, of which $6bn has been repaid and $4bn rolled over, leaving $13bn yet to be funded. There is a further repayment obligation of $75bn during FY24-26.
Despite a severe import crunch leading to significant unemployment, the current account deficit is running at about $8bn and there is a substantial backlog of dividends and other remittances.
Copyright Mettis Link News
Posted on: 2023-01-07T09:54:21+05:00
