Pakistan Business Council (PBC), a business policy advocacy platform, has alerted the newly formed government of multiple political parties about the grave economic issues being faced by Sri Lanka as Pakistan is also confronting similar challenges on the economic front.
In the letter sent to Prime Minister Shahbaz Sharif, the PBC has recommended a number of immediate steps to meet economic challenges. The PBC has informed the PM that he has left with several very critical choices that his government needs to make in the next few days. Foremost amongst these is restoring fiscal prudence, stemming the pressure on the foreign exchange reserves and reviving the IMF programme.
The council has also suggested a Charter of Economy with cross-party consensus. Referring to the government’s move to main fuel prices, a populist measure, the council has suggested not maintaining the prices. Besides, it has asked the government to withdraw the general subsidy on fuel while replacing it with targeted assistance through BISP.
While suggesting the government not to experience the kind of challenges confronting Sri Lanka, the PBC has also asked the government to reduce imports and raise Regulatory Duty (RD) on import of non-essentials as RD is impractical on fuel imports. The council has also suggested the PM to limit imports through conservation measures, including work from home; early closure of commercial centers and wedding halls; rationing of fuel for private vehicles.
The council has suggested the government maintain a competitive exchange rate while keeping the target of Pakistan’s real effective exchange rate (REER) in range 95 to 105 and avoiding egoistic/unsustainable measures to prop up the local currency.
In addition the PBC has recommended the Government to reinstate the relief on inter-corporate dividends as it was inadvertently treated as an exemption and withdrawn via the Income Tax (Second Amendment) Ordinance 2021. The relief is in line with established global practice of protecting inter-corporate dividends from multiple taxation and will promote the corporatization and competitiveness of local business groups in the global arena. At the same time, the withdrawal of inter-corporate dividend tax relief will disincentivize growth plans of existing business groups and discourage foreign investment in Pakistan as well.
For supporting exports, the forum has suggested continuing the regionally competitive energy tariff and other export incentives besides considering additional incentives for non textile exports and widening the geographical dispersion.
The government of multiple parties has also been suggested to accelerate FBR reforms to broaden the tax base, pending which, increase the advance and withholding tax rates on non-filers. Avoid knee-jerk revenue seeking measures that impact the long-term health of the economy Review anomalies that arose from hasty changes to meet the claimed demands of the IMF.
The PBC has also suggested the government liberate industry from legacies of past energy contracts, cross subsidies, system inefficiencies and theft to ensure stable and competitive energy for industry. It has also asked the government to fast forward the additional LNG terminals.