Govt urged to take steps aimed at arresting capital flight

31 May, 2024

KARACHI: Pakistan Business Forum (PBF) Central Vice President Ahmad Jawad said Pakistan’s economy needed short as well as long-term measures for proactively tackling the current economic impediments.

He said that the private sector growth is crucial. The discourse may shift from FDI to Domestic Direct Investment. First, reverse the capital flight (approximately $2 billion per year in the last two years), and once the local private sector invests, foreign investment will follow.

That’s why today our official figures are showing the bleak picture regarding our investment ratio which has reached its lowest point, accounting for 13.1% of the economy in the previous fiscal year. The fixed investment-to-GDP ratio has dropped by 11.4% compared to the previous year, reaching 12.4%. Private sector investment has also declined, making up only 8.7% of GDP, the lowest in almost 25 years.

“PBF’s Jawad also viewed that this decline in investment also highlights the challenges faced by the Special Investment Facilitation Council in attracting investment. Similarly frequent changes in taxation policies and biases towards the manufacturing sector have further reduced investment in this sector. The country’s productivity is declining, and economic growth is primarily driven by consumption, which accounts for approximately 88% of the economy’s growth.

The failure to meet the investment target of 15.1% of GDP has limited the government’s ability to address infrastructure and social sector issues, leading to an increased reliance on loans for development projects.

PBF official also stated the estimated size of the national economy for the current fiscal year is $373.6 billion, reflecting a 10.5% increase in dollar terms compared to the previous year, primarily due to a stable exchange rate. However, this figure is still below the $375.6 billion size recorded two years ago, which decreased due to devaluations.

Pakistan Business Forum further suggested that Pakistan must generate more fiscal space, followed by a more dynamic and open economy. Also the agriculture sector must be safeguard food security in the face of climate change and rising water scarcity.

Copyright Business Recorder, 2024

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