Islamabad - The Federation of Pakistan Chambers of Commerce and Industry (FPCCI)’s Businessmen Panel (BMP) has lamented that country’s investment ratio has fallen to its lowest level in 50 years, reaching mere 13 percent of the economy in the outgoing fiscal year, reflects the challenges faced by the Special Investment Facilitation Council (SIFC) in attracting investment without addressing fundamental economic issues and achieving political stability.
The BMP Chairman and FPCCI former president Mian Anjum Nisar observed that the failure to meet the investment target of 15 of the GDP has limited the government’s ability to address infrastructure and social sector issues, increasing reliance on loans for development projects.
According to the data, the country’s economy experienced a low growth rate of 2.38 percent compared to population growth of over 2.6 percent, while inflation on an average ranges between 25 percent and 26 percent, portraying persistent stagflation over the last few years. However, the overall size of Pakistan’s economy in dollar terms had gone up to $373 billion in the current fiscal year 2023-24 against revised estimates of $338 billion for the last financial year.
He said that the investment-to-GDP ratio stood at 12.8 percent in the fiscal year 1972-73, then it had remained on the higher side in all subsequent fiscal years since then and clinched highest-ever position of 26.2 percent of GDP in 2001-02. In the fiscal year 2014-15, it stood at 17.2 percent of GDP, and 17.1 percent of GDP in 2017-18 during the tenure of PMLN. During the tenure of Imran Khan, the investment-to-GDP ratio stood at 15.6 percent in 2021-22. It stood at 14.1 percent of GDP in 2022-23 under the PDM-led government, but then it witnessed the lowest ebb and declined to 13.1 percent of GDP in 2023-24. Mian Anjum Nisar said that that restoring energy sector viability requires strong cost-side reforms, including continuation of efforts to improve transmission infrastructure, better integration and expansion of renewable energy capacity; improving DISCO performance via either privatisation or long-term management concessions; moving captive power demand to the grid; revisiting, the terms of power purchase agreements; and continuing to convert publicly-guaranteed PHPL debt into cheaper public debt. He outlined the reforms’ agenda that has either been undertaken by Pakistan or where Islamabad needs to put more efforts.
In the case of the energy sector, terms of power purchase agreements have not come heavily under the scanner as the focus has first been on taking recovery and tariffs to a sustainable level. Higher energy prices triggered mass protests across Pakistan last year and have also stifled energy demand with policymakers scratching their heads on how to move forward for the sector’s viability. With runaway inflation triggering record high interest rates, demand for energy has reduced further, leaving the government in a ‘catch-22’ situation. He said that the only sustainable solution for the sector is decisive action to address cost-side and infrastructure issues. He quoted the IMF report which is an important document as many see it as a guideline in the light of Pakistan’s pursuit for a longer, larger programme with the IMF.
In its recommendations, he suggested to the government that basic tariff of IPPs should be changed in Pakistani currency instead of dollars and if this change is not made, an amount of Rs5,266 billion will have to be paid. Similarly, the profits to the IPPs owners should be given in Pakistani rupees instead of dollars. The FPCCI former president observed that besides increasing exports and controlling imports the government will have to take administrative measures. He argued that the devaluation of the currency was dictated by the IMF through prior actions and it has nothing to do with macroeconomic fundamentals. He said that there was a complete breakdown of economic policymaking, as the country’s fiscal policy had become subservient to monetary and exchange rate policies.
He said that the monetary tightening and exchange rate depreciation resulted in higher inflation, public debt and debt servicing. The empirical evidence showed that the one percent monetary tightening hiked the inflationary pressure by 1.3 percent in the case of Pakistan, he added According to provisional figures, approved by the National Accounts Committee (NAC), the per capita income has been worked out at $1,676 for the current fiscal year, while the Pakistan Bureau of Statistics (PBS) worked out per capita income in dollar terms at $1,680. There is a slight variation of $4, but the Ministry of Finance is expected to publish a figure of per capita income at $1,676 in the Economic Survey for 2023-24, going to be unveiled ahead of the upcoming budget for 2024-25. The savings-to-GDP ratio remained constant at 13.1 percent for the current fiscal year against 13 percent for the last financial year. The import restriction helped the country to slash the current account deficit, which is estimated at 0.03 percent of GDP, equivalent to remaining below $1 billion for the ongoing financial year.