The Pakistan Business Council (PBC) has sent a congratulatory letter to Prime Minister Shehbaz Sharif for assuming office and has assured the government of its full support in tackling the economic challenges.
It also called upon restoring fiscal prudence, stemming the pressure on the foreign exchange reserves, and reviving the International Monetary Fund’s (IMF) program.
CEO PCB, Ehsan Malik, wrote, “For the medium to longer term, we believe a Charter of Economy with cross-party consensus is essential”.
The advocacy group also listed the immediate economic imperatives and offered suggestions for progression.
The PBC urged the government to restore fiscal prudence by withdrawing the general subsidy on fuel and avoiding further populist measures that increase inflation. Instead, blanket subsidies should be replaced with targeted assistance through BISP, it said.
In view of the precarious economic situation, it was imperative to secure bilateral and multilateral funding, including the revival of the IMF program. The PBC recommended maintaining a competitive real effective exchange rate (REER), in the range 95-105. Additionally, any unsustainable measures to boost the rupee should be avoided as they will adversely impact economic revival prospects.
The government’s attention was also drawn to reviewing anomalies that had risen from hasty changes to meet the IMF’s demands. These include multiple taxations of intercorporate dividends and other anomalies in group taxation, tax credits for investment, and some other exemptions. The formal sector should be provided relief by phasing down the inequitable minimum and advance taxes which raise the cost of doing business.
In previous engagements as well, the PBC had advised the government to reinstate the relief on inter-corporate dividends as it was inadvertently treated as an exemption and withdrawn via the Income Tax (Second Amendment) Ordinance, 2021.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 the established global practice of protecting inter-corporate dividends from multiple taxations and will promote corporatization, the competitiveness of local business groups, and foreign investment in Pakistan.
Ehsan Malik also noted the need to stem the pressure on foreign exchange reserves by reducing imports by raising the Regulatory Duty (RD) on the import of non-essentials.
“As RD is impractical on fuel imports, limit import through conservation measures: work from home; early closure of commercial centers and wedding halls; rationing of fuel for private vehicles. Don’t allow the country to experience the challenges confronting Sri Lanka,” the PBC warned.
In the letter, it stressed the need to support export-led economic growth via the continuation of regionally competitive energy tariffs and other export incentives, and highlighted the dire need for the provision of “stable and competitive energy for industry; liberate industry from legacies of past energy contracts, cross-subsidies, system inefficiencies and theft. Fast forward the additional LNG terminal”.
The PBC also advised the government to consider additional incentives for non-textile exports and to widen geographical dispersion. It also identified the need to accelerate FBR reforms to broaden the tax base, pending which there will be an increase in the advance and withholding tax rates on non-filers.
“Don’t burden existing taxpayers further; avoid knee-jerk revenue seeking measures that impact the long-term health of the economy,” it cautioned.
