Karachi: Former Finance Minister Miftah Ismail has warned that Pakistan’s current economic crisis leaves no option but to speed up the agreement with the International Monetary Fund (IMF).
Ismail said these things during the second Pak-German Business Gathering of 2023 held at the Consulate General of the Federal Republic of Germany in Karachi. The event was organized by the Pakistan Desk of German Industry and Commerce (AHK) in collaboration with the diplomatic mission of the Federal Republic of Germany.
Addressing the German-Pakistan business community, the Consul General of the Federal Republic of Germany in Karachi, Dr. Rudiger Lutz emphasized the potential of Pakistan as a business destination for German companies. Despite the current challenges, he expressed confidence in the long-term prospects of bilateral trade.
Mufta Ismail highlighted Pakistan’s struggle to significantly improve its system and efficiency despite borrowing $100 billion from external sources. He attributed the lack of technological development in industries and inadequate training of manpower to the prevailing inflation. Foreign investment mainly targets the domestic market, which in turn limits export-oriented projects, he said.
Ismail thanked those who invested in Pakistan despite the difficult economic conditions. Lamenting Pakistan’s massive cycle of borrowing without a clear plan to repay the debt, he said, “Every year, we have to pay off $24 billion in debt that we don’t have.”
He warned that the international community is now increasingly reluctant to lend to Pakistan. Ismail also noted the significant gap between the country’s debt obligations and its revenue collection, with household debt requiring about 6 trillion and an estimated 7.2 trillion in revenue.
He noted that the government should allocate a significant portion of its revenue to the provinces, which is tantamount to giving money to children who spend it carelessly without caring about its origin. Ismail described the situation as a debt trap.
Discussing the impact of taxation, Ismail mentioned the emphasis on taxing the rich instead of increasing the sales tax, which disproportionately affects the poor. He also pointed out that the amnesty schemes introduced by Prime Minister Imran Khan are not new in the real estate sector.
As of October, Pakistan will have less than $2 billion in foreign exchange, as debt repayment by China differs from other countries and the process takes time.
Speaking at the event, Oliver Ohms, CEO of the German Emirates Joint Council for Industry and Commerce (AHK), highlighted the challenges faced by German companies due to the current economic conditions in Pakistan. “We want to see a resumption of dialogue between the political parties so that they can reach at least some consensus on the economy so that the country can run its business,” Ohms said.
Christian Böttcher, First Secretary of the Economic and Political Section at the German Embassy in Islamabad, also expressed hope that Pakistani stakeholders would soon reach a bilateral consensus on economic reforms. He stressed the need to revive the economy, enable interaction with international markets and ultimately lead to greater prosperity for the nation.
Despite the economic challenges, Pakistan’s local markets have shown resilience, with companies increasing prices, reflecting their pricing power. While the country is grappling with food inflation of 50% and headline inflation of 34%, the former finance minister highlighted the positive impact on agricultural income.
