Power sector destroying economy: Pasha

Ex-minister calls for promoting exports, reforming SOEs to get rid of challenges

LAHORE:

Former federal minister for finance Dr Hafiz A Pasha has said that promotion of exports, increase in tax-to-GDP ratio, revenue collection from the untaxed and a crash programme for the loss-making state owned enterprises are a must to get rid of the economic challenges being faced by the country.

Speaking to the business community at the Lahore Chamber of Commerce and Industry (LCCI), Pasha pointed out that last year a huge burden of Rs1,800 billion was placed on the national exchequer collectively by the state-owned enterprises.

“Power sector is a black hole that is destroying the economy,” he said, adding that the annual loss of National Highway Authority (NHA) was Rs173 billion.

He underlined the need for enhancing the tax-to-GDP ratio, which was the lowest in the world. “Some 22% of the agricultural land is in the hands of only 1% landowners. Last year, the income of top 20% agricultural landowners was Rs2,800 billion, but they paid only Rs2 billion in tax,” he said.

“About 80% of the tax is being collected from the industry while collection from the services sector is very low.”

Though Pakistan was a resource-rich country, its economic condition was deteriorating, he said and feared that the country’s foreign exchange reserves could go down below $7 billion before receiving money from the IMF. “The safe level is $18-19 billion.”

Public debt in July was around Rs50 trillion while the external debt-to-GDP ratio reached 41%. Five years ago, external loans stood at $83 billion, which today stand at $130 billion. “It is a matter of concern that we do not have foreign exchange reserves at the beginning of the financial year,” he regretted.

Speaking on the occasion, LCCI President Mian Nauman Kabir pointed out that massive rupee devaluation of around 18% had taken place in the last four months as the dollar surpassed Rs214 in the inter-bank market, after touching the peak of Rs239.

“This devaluation has hiked the cost of production for the industries, manufacturing and agriculture sectors since we are heavily reliant on imports of raw material, components, machinery, oil, food items and fertiliser,” he stated.

Furthermore, it has resulted in import restrictions and exploitation by commercial banks as they were demanding Rs10 to Rs15 above the inter-bank dollar rate for releasing import shipment documents, resulting in delay in clearance of shipments and massive demurrage and detention charges for the business community.

Kabir highlighted the rising imports that reached $80.18 billion in FY22 as compared to $56.38 billion in the previous financial year.

Comparing the 15% policy rate with regional countries, the LCCI president said that access to finance was a persistent challenge to the private sector.

Published in The Express Tribune, August 19^th, 2022.

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