Pakistan Business Council urges stakeholders to seek debt waivers

The Pakistan Business Council (PBC), one of the country’s largest corporate advocacy platforms, has urged authorities to seek waivers on debt by China, the Paris Club, bilateral and multilateral lenders.

The proposal comes as Federal Minister for Finance and Revenue Ishaq Dar last year categorically stated that Pakistan will not seek debt restructuring from the Paris Club.

“We have decided not to go to Paris Club,” Dar said in October, adding that in consultation with Prime Minister Shehbaz Sharif it was decided that it was not in the nation’s interest to ask for a restructuring.

“We will fulfil all sovereign (debt) commitments,” Dar said then.

The PBC in its report ‘Macro-Economic Priorities’ released on Friday said the country’s external debt servicing obligation for FY23 is $23 billion, of which $6 billion has been repaid and $4 billion rolled over, leaving $13 billion yet to be funded.

“(Moreover) There is further repayment obligation of $75 billion during FY24-26,” it said.

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The PBC was of the view that the International Monetary Fund (IMF) programme is critical to restore the confidence of friendly nations to provide assistance. “(However), in itself, it will not be sufficient to meet debt obligations unless they are significantly restructured, nor (will it) provide the space to implement fundamental reforms,” said the PBC, adding that short-term rollovers will not suffice.

The business body urged the government to secure liquidity on an immediate basis, through expediting/enhancing the current IMF programme by factoring the impact of floods.

The IMF programme is currently stalled at the level of the ninth review, with experts suggesting that Pakistan is reluctant to implement some of the lender’s conditions over their effect on political capital in a year when elections are scheduled to take place.

“Seek forgiveness of principal/interest on debt by China, Paris Club, bilateral and multilateral lenders,” said the PBC in its report.

“We recommend Pakistan, like other debt-distressed countries, obtain professional advice from sovereign debt advisors on restructuring and extending the debt payment terms and the cost of servicing it,” it said.

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Moreover, the PBC called for the government to clearly convey the seriousness of the economic crises to the public instead of denying the default risk.

“Motivate the public to conserve energy through effective communication. The government should lead by example in conservation and by adopting an austerity programme,” it said.

Lastly, the PBC said that the stakeholders should develop a cross-party consensus on fundamental reforms, especially for renegotiation of the 7th National Finance Award; broadening the tax base; resolving fundamental causes of the energy circular debt; credible reduction in government expenditures; and curtailing SOE losses and expediting privatization.