Secretary General (Federal) of the Businessmen Panel (BMP), Ahmad Jawad has said debt relief measures by G20 countries, the International Monetary Fund (IMF) and the World Bank (WB) for developing countries, including Pakistan providing one-year breather for Pakistan for paying back loans, is a positive step for our economy.
Our public debt is projected to increase to around 90 percent of GDP or Rs37.7 trillion in FY 2020, against 85 percent or Rs35.6 trillion prior to the shock, due to a sharp decline in growth and an increase in budget deficit, according to the IMF.
In its recent report IMF further said Pakistan's budget deficit is expected to rise to the highest level in history to 9.2 percent of the size of national economy or Rs4 trillion in current fiscal year due to the impact of deadly contagion on revenues and other expenses.
Jawad lauded the debt relief measures of the government on the approval of an additional $1.386 billion concessionary financing from the IMF to deal with the economic impact of coronavirus.
Though the Prime Minister Imran Khan has taken swift action to halt the community spread of the virus and introduced an economic stimulus package aimed at accommodating the spending needed to tackle the health emergency and supporting economic activity: including State Bank of Pakistan (SBP) has adopted a timely set of measures, including a lowering of the policy rate and new refinancing facilities, to support liquidity and credit conditions and safeguard financial stability.
Jawad also stated petroleum levy target for next fiscal year is likely to be projected at Rs489 billion. The original target was Rs300 billion that in post-corona situation is still kept at Rs295 billion despite a slump in global oil prices to the lowest level in 20 years.
This shows that the government does not have a plan to pass on the further reduction in oil prices to the consumers in this fiscal year.
Jawad said to reduce the interest rate by the SBP into single digit was need of the day to bring down from 13 percent to 9 percent in one month; I think from this move economy could be stimulated and handsome saving in the government loans up to 400 billion would materialised which was borrowed from commercial banks. If SBP would further slash the interest rate up to 5 percent it would be more helpful for the businesses by and large.
As affected countries have considerably reduced interest rates and Pakistan's trade and industry are also in a dire need to further reduction in the interest rate for sustainability under the prevailing conditions.
He said that foreign exchange reserves are increasing due to assistance from international financial institution; in this regard SBP should control and manage the market more effectively particularly the exchange rates against rupee.