Karachi, June 23, 2022: Mr. Shabbir Mansha, Acting President FPCCI, has welcomed the near-certain resumption of International Monetary Fund (IMF)’s Extended Fund Facility (EFF) program for Pakistan with cautious optimism as it may unlock the stabilization of exchange rate and pave the way for major external funding programs for the fiscal year 2022 – 23 from world bank and Asian Development Bank (ADB) – provided the government utilizes this breather to bring down inflation and interest rate through prudent fiscal and monetary management.
Acting FPCCI Chief explained that real effective exchange rate (REER) shows that the rupee is underpriced by up to 5 – 7 percent on the back of rumors and foreign exchange crunch for transactionary purposes; and, the rupee can be strengthened to its true value in a couple of months; however, this process should be incremental and sustainable through market mechanism. Volatility is the last thing that we need and we need to quell the rumors that drive the volatility in the foreign market, he added.
Mr. Shabbir Mansha emphasized that the interest rate of 13.75 percent will not let the economy grow at any meaningful rate; and, prices of electricity & gas have already made us uncompetitive as far as the exports are concerned. Additionally, there are rumors that interest rate may be further raised. He added that the government should also consult with the stakeholders in business, industry and trade on how and when interest rate can be brought down; so that, businesses can plan their year ahead accordingly.
Mr. Shabbir Mansha noted with a sigh of relief that international oil prices have declined by a considerable 7 – 8 percent approximately from its peak of $123 per barrel to under $110 per barrel; which must be passed on to the end consumers in a phased manner.
Mr. Shabbir Mansha has also pinned his optimism that $2.3 billion loans from Chinese commercial banks on favorable terms will put a halt to the depleting foreign exchange reserves and roll over of a few other maturing Chinese debts will provide the government with a solid support to build the reserves equivalent to at least two months of import cover.
Mr. Shabbir Mansha apprised that the key lies in controlling the current account deficit to $10 – 12 billion; which will cross $20 billion and more than 5 percent of the GDP. Squeezing the existing taxpayers even further; limiting commercial activities and re-imposing petroleum development levy (PDL) to woe IMF will not lead us anywhere, he added.
Mr. Shabbir Mansha emphasized that imposition of PDL – though in a phased manner – will totally destroy the cost of doing business competitiveness and will fuel the inflation like never before through its multiplier effect. He demanded that the government should take business community on board on its commitment with IMF on PDL.
Another major area of concern during the upcoming fiscal year would be the commitment of the government with the IMF that it will impose more taxes to the tune of Rs. 436 billion. He demanded that the government should make it clear how and on which sectors it will impose the additional taxes. Acting FPCCI Chief has also stressed upon the need to start a consultative process with the stakeholders on the implementation status of hike in electricity base tariff; impending PDL imposition and new or additional taxes as these costs will cumulatively destroy the business sentiment and industry will come to a halt.