The Federation of Pakistan Chambers of Commerce and Industry’s Businessmen Panel (BMP) has asked the government to focus on improving governance through structural reforms and adopting austerity measures and claimed the economic losses caused by the catastrophic floods may cross $30 billion. The inflation rate may touch 30% and Gross Domestic Product growth may shrink to just 2% from the earlier projected 5% for the current fiscal year, BMP Chairman and FPCCI former president Mian Anjum Nisar stated in a press release received by WealthPK.

The government should execute economic and legislative reforms to bring about economic stability, as the measures taken so far by the government have resulted in hyperinflation and high policy rates, increasing the cost of doing business in the country, he claimed. Mian Nisar further claimed that for just getting $1.17 billion IMF’s tranche, the government had imposed over Rs 1,700 billion taxes, agreeing to a free market economy, which did nothing better. He feared that floods might have caused over $30 billion economic losses and damages as the National Flood Response Coordination Centre had dismissed the initial $18 billion assessment.

He claimed that some 37% population had been hit by poverty after 118 districts were flooded and added poverty and unemployment may cross 36% from 22%. Mian Anjum said that agriculture growth faced severe impact in the aftermath of floods and the value addition of agro growth ranging over Rs500 billion might evaporate in the current fiscal year. The agriculture growth target and services sector faced severe impacts, he added. He said that the IMF loans seemed paltry in the face of the estimated over $30 billion flood damage. In comparison to the 2010 super flood, these floods have substantially affected crops and other agricultural products, further exacerbating food inflation and shortages, he added.

The austerity measures required by the IMF program will also be a significant burden on the population facing humanitarian crisis, Mian Nisar said. He regretted that Pakistan had failed to achieve sustainable higher growth and reformed its tax system to tap the real potential. The overwhelming part of tax collection is anti-growth, based on regressive measures to overburden the existing taxpayers, he believed. The flawed policy of relying on debts had made the economy vulnerable to external shocks and any force majeure event, he observed.

“To date, the economy is managed in an ad-hoc manner, where we look forward to economic assistance from global lenders and friendly countries every year to meet fiscal gaps,” he claimed and added, “Because of this, neither have we been able to expand our resources and inflows, nor curtail wasteful expenses and unnecessary outflows.” The challenging global economic situation, coupled with catastrophic floods, has made the situation worse for Pakistan, he said. Due to aggressive government policies and natural calamity, inflation was at a record high, he added.

Mian Nisar said the unprecedented rainfalls, floods and landslides have wiped out agricultural lands, livestock, and critical infrastructure besides badly affecting rural living. This situation could trigger a new wave of poverty and a national food emergency, he added. According to estimates only in Sindh province, more than 1.2 million acres of agricultural land was affected, he said. The preliminary report showed that the overall floods’ loss in GDP growth could be 3.3% to 3.7%. But if the losses were revised upwards to $40 billion, the economy would contract.

The interim report showed that about 20% of the Public Sector Development Programme, or Rs218 billion, would have to be diverted towards disaster relief expenditure, resulting in an additional unemployment of 600,000 due to low spending. Flood damages to crops, livestock, infrastructure and the expected slowdown in economic activities will have implications for the external sector. Pakistan had become a victim of global warming, although its contribution was less than 1%, he said.

Credit: Independent News Pakistan-WealthPk