The Pakistan Business Council (PBC) has urged the government to work on four key priorities to ensure that Pakistan meets its debt obligations and has sufficient space to undertake fundamental reforms.
In its Macro-Economic Priorities document, PBC has highlighted that Pakistan’s external debt servicing obligation for FY23 is $23 billion, of which $6 billion has been repaid and $4 billion rolled over, leaving $13 billion yet to be funded.
There is a further repayment obligation of $75 billion during FY24-26. Despite a severe import crunch leading to significant unemployment, the current account deficit is running at about $8 billion and there is a substantial backlog of dividends and other remittances.
The PBC said that whilst the IMF programme is critical to restoring the confidence of friendly countries to provide assistance, in itself, it will not be sufficient to meet debt obligations unless they are significantly restructured, nor provide the space to implement fundamental reforms. Short-term rollovers will not suffice.
PBC has highlighted four priorities that need to be worked upon:
Secure immediate liquidity by expediting/ enhancing the current IMF programme by factoring the impact of floods
Buy time for fundamental reforms by restructuring non-commercial foreign debts and by extending the current or negotiating a fresh IMF programme. Seek forgiveness of principal/interest on the debt by China, Paris Club, bilateral and multilateral lenders.
It further recommends that Pakistan, like other debt-distressed countries, obtains professional advice from sovereign debt advisors on restructuring and extending the debt payment terms and the cost of servicing it. There is growing global recognition of the need for debt waivers.
Clearly convey the seriousness of the economic crises to the public instead of denying the default risk. Motivate the public to conserve energy through effective communication. PBC has also asked the government to lead by example in conservation by adopting an austerity programme.
Develop cross-party consensus on fundamental reforms in critical areas that include the renegotiation of the 7th National Finance Award, broadening the tax base, resolving fundamental causes of the energy circular debt, credible reduction in government expenditures, and curtailing state-owned enterprises (SOE) losses and expediting privatization.
The PBC has proposed a Pakistan Economic Reforms Programme and would like to get the parties around a table to agree on a minimum consensus.