KARACHI: The business community has said that the recent pledges for the rehabilitation of the flood victims will not resolve the economic crisis in the country, a statement said on Saturday.
The Federation of Pakistan Chambers of Commerce and Industry’s Businessmen Panel (BMP) has said the multilateral donors and friendly countries’ huge aid pledges might not bring any significant impact on the struggling economy, as the sustainable solution to Pakistan’s economic issues lies in the structural reforms and consistent policies.
FPCCI former president and BMP Chairman Mian Anjum Nisar said that it is high time that the government should start thinking about the debt restructuring, including foreign and domestic.
The decision to take more loans will keep complicating the problems in the long-term, as the government needs $23 billion in foreign debt repayments for this fiscal year, which is the direct result of such decisions of taking loans from foreign nations.
For Nisar, the country’s economy is plunging into an ever-deepening ravine with plummeting foreign exchange reserves, with the continuation of the flawed policy of keeping the interbank dollar rate artificially low that is increasingly being attributed to the government rather than the State Bank of Pakistan (SBP) irrespective of the autonomy granted to it.
The government has apparently taken a riskier and longer path to beg from the foreign countries to avoid the risk of default. The decision to sell the assets is good but it may not materialise in the next few weeks. The foreign exchange reserves are at a critically low level. In case Pakistan defaults, the economic wheel in the short-term will come to a halt, the nation will suffer, the imports would be cut to critical level, that too, on advance payments.
If the decision is to enhance the Saudi deposit to $5 billion and make a claim that the sovereign default has been averted, then its cost will be too high to bear in the longer run.
The government’s dilemma is that it should protect its remaining vote bank by not going to the International Monetary Fund (IMF). However, its immediate preference seems to protect the vote bank but it may end up losing both due to hyperinflation likely to be followed by a default.
According to Nisar, undertaking structural reforms require political will. Enacting structural reforms, such as improvements in the tax collection system, bureaucracy and ease of doing business requires major political will and strict implementation of policies, he added.
The BMP chairman said this is the first time the world has acknowledged climate loss and set a new precedent by pledging billions of dollars for the flood victims in Pakistan, he said, recalling that earlier the global community had pledged for Ukraine, Syria and other countries but the difference is that this time it is for the climate loss.
Acknowledging that the Pakistan government got massive support from the global community for the flood victims after they saw the government’s willingness to help the people, showed a positive sign for the flood-affected people in Pakistan.
The reconstruction and rehabilitation process in the flood-hit areas should be expedited, as Pakistan has secured pledges of over $10 billion from the international community and the global financial institutions at the Geneva conference.
Expressing gratitude to the international community, Nisar said that with this financial support, Pakistan would be able to commence work on the reconstruction and rehabilitation of the flood-affected areas, repairing of damaged infrastructure, agriculture and poverty alleviation.
Pakistan is among the countries that face endless sufferings because of the climate-induced rains and floods, affecting over 33 million people in the country last year.
Though he views global pledges positively, nonetheless he pointed out that the rich nations had failed in the past to meet a longstanding commitment to deliver $100 billion to help the poorer countries cope with the climate change.
Also, the world governments’ plan to cut emissions in the years ahead have proven to be not enough to avert catastrophic climate change. While referring to the global pledgers’ past record, where they failed to generate finances and cut emissions, he said, pledging might help unlock an agreement on key issues but it was too early to say whether it would lead to positive change for the environment and climate change victims.
Though the world community responded overwhelmingly to Pakistan’s appeal by pledging over $10 billion, chances are slim that the donors will make good on their commitments, mainly because of the domestic political situation.
According to him, the government had sought financial assistance from the global community, as the funds needed in the aftermath of last year’s devastating floods had quickly ramped up.
The world has undoubtedly extended its support to Pakistan but what is left to be seen is if the country can protect these pledges and provide development projects to the donors to finance.
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