Traders’ demands

No U-turn on monetary and fiscal policies until the economy stabilises: Prime Minister Imran Khan has made it loud and clear to the business community which has been expressing fears for quite some time that if the economic slowdown continues, more and more industrial units will turn sick. A delegation of the FPCCI met the PM on Monday and placed three main demands before him — cut in interest rate, reduction in energy prices and withdrawal of the CNIC condition on purchases worth Rs50,000 and above — but to a flat refusal.

The fiscal tightening measures adopted by the government are virtually irreversible — for being a part of the conditions imposed by the IMF against a six billion dollar bailout deal that was agreed last May. The IMF dollars may have been giving some financial cushion to the cash-strapped government and helping it carry on with its stabilisation policies, but they are proving too costly to the common man. The deal with the IMF — whereby the rupee was depreciated by more than 30%, power and gas tariffs as well as fuel prices were repeatedly raised and the interest rate was doubled over a period of time — has resulted in an unprecedented price hike.

While there is no way to justify the methods the traders are using to avoid the tax net, some of their concerns are genuine. Increasing utility charges have made the businesses unviable. Besides, the rising interest rate has led to the working capital turning expensive. No wonder then that there has been a 71% fall in private sector borrowing in the first five months of the ongoing fiscal year.

But as of now, the government is in no position to provide relief to businessmen or the common man, like in terms of reduction in the interest rate or energy tariffs, as it is bound to enhance tax collection in line with the IMF conditionalities. One wonders, then, how the year 2020 could be the year of economic progress, as claimed by the PM.

Published in The Express Tribune, January 16^th, 2020.

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