As the country reels from the worst flooding in history, Pakistan is facing a trifecta of challenges. In just one spell of monsoon in Pakistan, some 33 million people have been affected and at least 1500 have lost their lives including more than 500 children. Estimates suggest that the floods have caused at least $10 billion in damages. The horrendous effects of these floods are yet to haunt us as there’s a looming agriculture and energy crisis upon us. The annual inflation rate increased to 24.9% in July 2022 which was 9.74% in June 2020. The SBP weekly report released this week revealed that the country’s total liquid foreign exchange reserves went down by $308 million (-2.1%) on September 23, 2022, to $13.76 billion, compared to $14.07 billion in the previous week. The SBP reserves decreased $8.005 billion, compared to $8.346 billion a week earlier. However, these reserves increased earlier this month only, when the central bank received a $1.2 billion tranche from the International Monetary Fund (IMF). The tranches are not the solution for strengthening our fragile economy. The government must undertake several drastic measures to revive the country’s faltering economy. The last six months have seen some of the highest prices of energy the world over. Coupled with the political instability, the rolling blackouts and extremely high prices of electricity has driven many of our export-oriented business to closure. The Pakistani Bonds and Sukuk, as with most world countries, are facing a steep decline as the global economy is shrinking. What was once considered an economic cool-down, is fast looking like a global recession. With the current floods damaging our agricultural produce for the coming season it appears that Pakistan will be in dire need of forex for the import of food grain. To tackle these all-lingering dangers, the government must provide ease to the sector and industry that could stabilize the economy. During the last COVID peak in 2020, as Pakistan’s economy needed a kick start, the then government introduced measures to promote the construction industry. Pakistan’s real estate sector makes a significant contribution to the country’s economic development. According to World Bank reports, real estate assets account for 60-70% of the country’s overall wealth. The real estate market is worth $300 to $400 billion. After agriculture, it is Pakistan’s second-largest source of employment. It is one of the key sectors that, with the trickle-down effect, directly drives multiple sectors. These industries including cement, steel, electrical and appliances, ceramics, glass, etc, are supported by construction work. The incentives and support of the government resulted in a boost in the market, creating employment for hundreds of thousands of people, and a massive influx of forex as overseas Pakistanis sent money to invest in the real-estate sector. In 2020, the personal remittances received in Pakistan amounted to approximately $ 26.11 billion. However, the number is declining due to fluctuant policies. Today, our nation is in dire need of a kick-start, with joblessness close to the 2020 levels. The stagflation has caused unrest in the populace. According to recent statistics, Pakistanis spend around $5.2 billion on construction and real estate every single year. The new taxes imposed by the government through the budget for 2022-23 on the real estate sector will badly affect the growth of the construction industry and largely increase unemployment. It is a critical turning point for this government to turn the tables and implement the policies they have initiated for COVID. Also, the government should increase taxes on non-filers for tax returns, but it should avoid imposing more taxes on the filers. A clear and strong plan is needed to energize the construction industry. The model that was highly successful in 2020 is evident and easily duplicable. The government must act quickly to mobilize the economy. We ask the government to review the proposed levies and ease the way for the construction industry to start with the same boom again. A thriving construction sector will not only drive multiple sectors in the country, but it will also be a highly effective way of inviting forex investors into the country.
USMAN IQBAL,
Lahore.