Experts agreed on Friday that Pakistan is facing a historic crisis with political and economic instability taking place at the same time, and admitted that tough measures were the only way to deal with them.

Moderating a session titled 'Economic Challenges & The Road Ahead', Business Recorder Head of Research Ali Khizar noted that the ongoing crisis was unprecedented in nature because political and economic uncertainty were taking place at the same time.

“This has happened in 1993 and 2008 as well and the new government is taking the ownership of problems by making tough decisions,” he said. “However, the past 2-3 months have proved to be damaging for the economy due to fuel subsidy.”

Pakistan would need 6-8 months to stabilise, he added.

He highlighted that fallout from Covid-19, global commodity supercycle and Ukraine unrest were contributing to global economic crunch. All these problems, combined with domestic issues, placed Sri Lanka, Lebanon and Argentina at the brink of devastation. Pakistan is among the countries that are at the brink of default, he said.

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Economist Waqar Masood agreed that the mix of political and economic uncertainty posed serious problems to the economy.

“The new government took time but now it is taking right steps to correct the economy,” he said. “However, lack of trust of people in the leadership is an issue.”

He was of the view that political instability was the elephant in the room, adding that electricity tariffs could rise by Rs13-14 which would be unsustainable for a common man. He suggested motivating the International Monetary Fund (IMF) to allow Pakistan to make the increase gradually.

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Talking about the upcoming budget, he stated that suggestions of the global lender would be troublesome for the country. IMF is demanding increase in tax collection by Rs300 billion which could be done by enhancing the tax net.

This would take the total amount of taxes imposed since the beginning of the programme to Rs1 trillion, Masood said.

“There is a need to repair the tax machinery however, efforts on this front seem weak,” he said. Noting that the circular debt in the LNG sector had swelled to Rs1.5 trillion, he stressed the need to eliminate it else the economy would be pressurised.

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Moreover, he underlined that 12 countries including Egypt were on the verge of food insecurity because of Russia-Ukraine war and Pakistan will face it as well. He highlighted that Moscow and Kyiv supplied substantial food commodities to the world.

Arif Habib Group Chairman Arif Habib stressed that difficult measures were direly needed and the biggest problem for Pakistan was the current account deficit.

He said that remittances, agriculture and construction sectors have grown by large proportions. He raised concerns over the politicisation of inflation and noted that delayed decision making in 1998 and 2007 cost the nation.

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“Timely measures are a solution to that,” he said. “We want a deal with IMF to eliminate risks on the external front but for that to materialise, some policies have to be adopted for medium to long term.”

He lamented that the government turned a blind eye towards rising imports and stressed that the current decisions should have been taken earlier.

Habib urged the policymakers to approach other global lenders after IMF revives the programme because “Pakistan needs $10-12 billion.”

“The current account deficit has to be controlled and export sectors should be subsidised if the need arises,” he said. “Exporters bring in dollars so they should be incentivised.”

He pointed out that businessmen were making profits but the threat of default and looming uncertainty was denting their confidence.

Lucky Cement CEO Ali Tabba emphasised the dire need of structural reforms and charter of economy.

He underlined that every government worked towards achieving high growth which inflated the current account deficit.

“Pakistan should learn from Covid-19 and Ukraine invasion,” he said. “Pakistan’s resources are falling while population is rising.”

He voiced concern that Pakistan’s energy segment was import driven and new power plants ran on imported fuel and called for rapidly shifting to renewable energy.

Citing that outflow of money was huge, he called for introducing tax reforms and taxing every sector of the economy to know its actual size.

“We need to resolve the current account deficit else we will need funding all the time,” he said. He agreed that export sectors should be subsidised as well.

Systems Limited CEO Asif Peer stated that Pakistan knew “what to do and how to do it however, execution is a huge issue.”

He stressed upon services-led growth which is being practised by 70% of the nations in the world.

“Services led exports can solve our problems. We have youth bulge and we need to convert talent to resources,” he said. “We can grow exponentially by focusing and nurturing talent.”