The Pakistan Business Council (PBC) has recommended that the newly-formed government, led by Prime Minister Shehbaz Sharif, withdraw fuel subsidies and revive the International Monetary Fund (IMF) programme.
In a letter sent to PM Sharif, Ehsan Malik, the CEO of PBC, said the new government needs to overcome several economic challenges.
“Foremost amongst these is restoring fiscal prudence, stemming the pressure on the foreign exchange reserves and reviving the IMF programme,” read the letter to the PM.
“For the medium- to longer-term, we believe a Charter of Economy with cross-party consensus is essential,” Malik said.
The PBC chief said that in order to restore fiscal prudence, the government should withdraw the general subsidy on fuel, and replace it with targeted assistance through the Benazir Income Support Programme (BISP).
“Avoid further populist measures that also result in increasing inflation,” he said.
He also said the government should curb imports to reduce pressure on the foreign exchange reserves by increasing 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 centres and wedding halls; rationing of fuel for private vehicles,” Malik said in his letter to the PM.
“Don’t allow the country to experience the kind of challenges confronting Sri Lanka,” read the letter.
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Furthermore, PBC urged the government to revive the IMF programme. It also called for maintaining a competitive exchange rate, and targeting a REER in the range of 95-105. “Avoid egoistic/unsustainable measures to prop up the PKR,” it said.
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The PBC urged the government to continue the regionally competitive energy tariff and other export incentives to boost exports, while calling for additional incentives for non-textile exports and to widen the geographical dispersion.
On taxation, PBC said the government should accelerate FBR reforms to broaden the tax base.
“Don’t burden existing taxpayers further. Avoid knee-jerk revenue seeking measures that impact the long-term health of the economy,” it said.
The PBC said it wants the government to phase down the inequitable minimum and advance taxes on the formal sector, which raise the cost of doing business.
The council also called for the removal of past energy contracts, cross-subsidies, system inefficiencies and theft to maintain a stable and competitive energy for industry. “Fast forward the additional LNG terminals,” it added.