In the wake of repaying external debt, the central bank's foreign exchange reserves have been steadily decreasing over the past year, and in such circumstances, the creditors have to take debt relief into consideration so that Pakistan could put disaster assistance before loan repayment, Federation of Pakistan Chambers of Commerce and Industry's Businessmen Panel (BMP) Chairman Mian Anjum Nisar said in a press statement received by WealthPK.

He supported the UN and Prime Minister Shehbaz Sharif’s call to relieve debt pressure on Pakistan by suspending international debt repayments and restructuring loans in order to provide immediate humanitarian assistance to the flood-ravaged country.

Also a former president of the FPCCI, Mian Anjum Nisar devastating floods have completely destroyed the country's economy. As a result of spending a large portion of its income on debt servicing, Pakistan is extremely vulnerable, and the international community should consider some sort of debt write-off for the country, he said.

"The BMP demands a complete suspension of debt payments and demands that the G20 provide debt relief to the developing nations. As the nation sends a sizable portion of its tax revenue to international creditors, we completely support the administration, which has already contacted bilateral creditors to see if it can obtain any relief," he added.

He added that Pakistan's payments might be postponed as soon as possible in order to create financial room for quick disaster response and recovery, which has been made more difficult by the devastation of the floods.

"Pakistan paid lenders $11.6 billion last year, which is more than its central bank currently has in reserves," he continued.

Pakistan's request for a moratorium on interest payments is greatly appreciated because the majority of their debt is made up of loans that are taken out in order to pay off earlier loans, which keeps them in a never-ending cycle of debt.

He also proposed some restructuring or debt swaps, whereby creditors would forgo repayments in return for Pakistan agreeing to invest in climate change-resilient infrastructure. Pakistan, whose external debts total about $100 billion, was struggling with a balance-of-payments crisis that strained its ability to repay loans even before unprecedented flooding recently. The country, which has been particularly hard hit by the global surge in commodity prices, received a $1.1 billion bailout from the IMF last month. The disaster has amplified the challenges, affecting more than 30 million people and causing an estimated $30 billion in damage. He argued with the creditors to find a longer-term solution that would involve lowering Pakistan’s debts to a sustainable level to enable the government to put the people’s needs first.

FPCCI former president said that the country's reserves had been declining due to scheduled foreign debt payments. Even though the central bank experienced some inflows over the past few weeks, they were less than the outflows, which caused a sharp decline in the foreign exchange reserves.

For countries like Pakistan, he urged the international community to take into account a full debt write-off in order to lessen their post-flood suffering. He noted that Pakistan's fiscal flexibility and sound healthcare system are both lacking. Therefore, he said, rather than providing a short-term relief, the IMF, World Bank, and G20 countries should abandon the loan at this time.

He emphasized that there is no benefit to temporary debt relief on principal and interest payments because the suspension period will only last for a few months and all debt service that becomes due during that time will be combined into a new loan, on which repayments will resume shortly after, to be paid over a three-year period. Instead of loans, he urged them to give Pakistan grants. As the largest category of expenditures in FY23, he claimed that debt servicing would consume more than two-fifths of the nation's total budget.

The government's contentious agreement with the International Monetary Fund, according to the former head of the FPCCI, has wreaked havoc on the industry by causing an unconscionable rise in utility prices, causing the country's economy to suffer unprecedented damage. The central bank is now completely unaccountable to Pakistan's parliament, which does not seem to be a sound policy. The government has also overextended Pakistan's debt to the point of crisis. The business community is currently witnessing a very worrying meltdown without any comparable capacity for expanding the tax net or increasing direct taxation. “As a result, presently we are totally exposed to epic levels of debt, poverty, and poor governance,” he added.

Credit: Independent News Pakistan-WealthPk