Karachi, May 10, 2022: Ismail Suttar, President of the Employers’ Federation of Pakistan (EFP), has requested the Prime Minister Shehbaz Sharif and the Federal Minister for Finance & Revenue Miftah Ismail to take urgent steps to avoid a national crisis due to Pakistan’s worsening Balance of Payments (BoP) position. Without the timely adoption of such measures, Pakistan will face dire consequences in the very near future.
In a statement, the EFP president said that rising debt repayments and constantly increasing import payments are fuelling Pakistan’s BOP crisis. Pakistan’s current monetary imbalance has been caused by an excessive rate of credit creation.
Ismail Suttar said, “The country’s imports have surged to $65.5 billion (FY 2021-22) in comparison to $44.7 billion (FY 2020-21) in the previous financial year. In the 2021-22 financial year, Pakistan recorded $26.2 billion in exports. One of the main reasons for incurring such a deficit is Pakistan’s heavy reliance on petroleum product imports. The ongoing war between Russia and Ukraine has further caused commodity prices to skyrocket which is why Pakistan needs to plan ahead as the economy cannot sustain such costs any longer”.
He further said that due to increasing demand, Pakistan’s energy import bill has nearly doubled to $14.81 billion in the current financial year as compared to $7.55 billion incurred in the previous year. This BoP deficit is causing a huge strain on the economy leading to an inefficient use of Pakistan’s already limited foreign reserves. Due to this widening gap in the BoP, it is imperative for the Government of Pakistan to implement monetary and fiscal policies that will help reduce aggregate expenditure in the economy.
“One such measure is to introduce policies that discourage the use of petroleum products. Such a policy can be in the form of an increase in the prices of petroleum products, imposing an import quota on petroleum products or even introducing laws that restrict the amount of petroleum products an individual can consume”, he added.
Ismail Suttar was of the opinion that the Government of Pakistan should actively work on a comprehensive electric automobiles policy to encourage the use of alternative sources of energy to petroleum. Another measure is that the Government of Pakistan should impose a temporary ban on the import of luxury/non-essential goods such as luxury cars until we are able to substantially improve our BoP position. Another measure is the Government of Pakistan should provide incentives/subsidies to companies involved in export as this would help in making our products more competitive in the international markets, thereby resulting in a better BoP position due to an increase in exports.
The EFP president added that the Government of Pakistan should act immediately and implement such measures instead of shying away due to public uproar/disapproval as without such measures Pakistan is heading for an economic crisis of epic proportions. The State Bank of Pakistan’s (SBP) reserves currently stand at an estimated $10.499 Billion. These reserves are depleting at an accelerated pace due to debt repayment, high inflation and weakness of the Pakistani Rupee. Piling on more debt may give temporary relief, however will cause added pressure and push Pakistan deeper into the debt-trap.