Thursday, July 4, 2024 06:36 PM
The Businessmen Panel of the Federation of Pakistan Chambers of Commerce and Industry raises concerns over Pakistan's declining investment ratio, hitting a 50-year low at 13% of the economy. High inflation rates and energy sector challenges pose hurdles to economic growth.
The Businessmen Panel (BMP) of the Federation of Pakistan Chambers of Commerce and Industry has raised concerns about Pakistan's decreasing investment ratio, hitting a 50-year low at only 13% of the economy in the last fiscal year. This decline highlights the struggles faced by the Special Investment Facilitation Council (SIFC) in attracting investments amidst unresolved economic issues and political instability.
Missing the investment target of 15% of GDP has hindered the government's ability to address crucial infrastructure and social sector needs, leading to a heavier reliance on loans for development projects. Despite the economy's growth to $373 billion this fiscal year, high inflation rates persist at around 25-26%, indicating a prolonged period of stagflation.
Over the years, Pakistan's investment-to-GDP ratio has varied, peaking at 26.2% in 2001-2. However, under the current administration, the ratio has plummeted to 13.1% in the fiscal year 2023-24, marking a significant low. Reviving the energy sector demands substantial cost-side reforms, such as enhancing transmission infrastructure, expanding renewable energy capacity, and improving DISCO performance through privatization or management concessions.
The energy sector's woes have been worsened by soaring energy prices, leading to protests and reduced energy consumption. Addressing these challenges necessitates prompt action on cost-side enhancements and infrastructure upgrades. Recommendations from the IMF include converting Independent Power Producers' (IPPs) basic tariffs to Pakistani currency and ensuring profits are disbursed in Pakistani rupees to mitigate financial risks.
The declining investment trend in Pakistan poses significant hurdles to economic growth and development. Addressing the root causes of this decline, particularly in the energy sector, is crucial for stabilizing the economy and attracting much-needed investments. Implementing the recommended reforms can pave the way for a more sustainable and prosperous future for Pakistan.