HYDERABAD: President Hyderabad Chamber of Small Traders and Small Industry, Muhammad Farooq Shaikhani, has penned a letter to Federal Minister for Finance Muhammad Aurangzeb, outlining the economic hurdles being encountered and offering suggestions for their mitigation.
He emphasized the critical economic challenges confronting the newly established government. These include sluggish economic growth, escalating inflation, rising unemployment rates, and the formidable burden of both internal and external debts, which have surged significantly in recent years.
He emphasized that Pakistan has long been ensnared in a persistent debt trap, exacerbated by recent increases and the contracting economy, rendering the repayment of debts and interest increasingly untenable. According to data from the American organization Blog Berg, the interest payment rate on Pakistan’s loans has surged to unprecedented levels relative to GDP, rendering repayment increasingly unmanageable.
President Farooq Shaikhani, highlighted data released by the State Bank of Pakistan indicating that Pakistan’s total debt, both internal and external, amounts to 65,189 billion rupees. This marks a staggering increase of 14 trillion rupees in just one year, with the country’s total debt standing at 51,058 billion rupees as of December 31, 2022. This surge represents a notable 27.7% increase in debt within a single year. Among this total debt 42,588 billion rupees are owed to domestic banks and financial institutions, while 22,601 billion rupees are owed to foreign international organizations and countries.
HCSTSI President When converted to dollars, Pakistan’s total debt amounts to 131 billion dollars, according to his statement. He further noted that in the ongoing financial year, Pakistan faces the daunting task of repaying 24.5 billion dollars of debt, comprising 3.8 billion dollars in interest payments and 20.7 billion dollars in principal. By the end of the financial year, by June 30, 2024, Pakistan must settle a significant portion of this debt, amounting to 10 billion dollars in dollar-denominated loans.
Farooq Shaikhani eloquently conveyed that the government’s practice of procuring loans from banks at an exorbitant 22 percent interest rate resembles attempting to collect water with a sieve. He highlighted the absence of eligibility criteria and a feasible repayment policy, foreseeing dire consequences for both the populace and the business community burdened by these loans.
Shaikhani emphasized that the current lending conditions, with such steep interest rates, render it unfeasible for any industrialist to establish or expand industries in Pakistan.
Stressing the pivotal role of affordable loans in boosting Pakistan’s exports, he advocated for a conducive environment with lower interest rates, foreseeing a significant enhancement in the country’s economic landscape.
Shaikhani indicated that the Pakistani government lacks robust and comprehensive data about agriculture and small-scale shopkeepers. Acquiring comprehensive data is deemed crucial as it would facilitate the formulation of policies and initiatives aimed at enhancing the well-being and prosperity of these significant components of our economy.
Shaikhani emphasized the imperative for the government to devise a comprehensive economic management strategy to address the prevailing economic challenges, stressing the importance of consensus among all stakeholders. However, the post-2024 elections have unfortunately exacerbated political instability, posing a significant threat to the nation’s economic stability. This escalating instability is anticipated to further impede efforts to repay the country’s debts, underscoring the pressing need for cohesive governance and concerted efforts to mitigate the adverse effects on the economy.
Copyright Business Recorder, 2024
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