ISLAMABAD: An influential group of international investors operating in Pakistan has welcomed the government’s “bold policy measures” to finalise the IMF programme but has warned that such a stance, along with the central bank’s monetary tightening and fast currency depreciation, was further eroding investor confidence.

Representing more than 200 top foreign investors, the Overseas Investors Chamber of Commerce and Industry (OICCI) has approached Finance Minister Miftah Ismail for immediate course correction, including a clear road map to reduce expenditure, sell public sector entities and broaden the tax base, beyond what was announced in the latest budget.

In a letter to Mr Ismail, OICCI President Ghias Khan and Chief Executive Abdul Aleem said the chamber’s more than 200 members had invested over $20bn in Pakistan over the past ten years and would continue to be the largest tax contributor to the exchequer.

“We compliment you for finalising the IMF programme, subject to approval of the IMF policy board,” they told the minister. “We also appreciate the bold stance of your government in taking measures to align the petroleum prices to the actual cost. Hopefully, the electricity and gas pricing will also be aligned to cost, no subsidy, level soon.”

Welcomes govt’s ‘bold policy measures’ but laments high taxes, rupee’s slide

Meanwhile, the State Bank of Pakistan (SBP) has also increased the discount rate to a record high level to contain the fast-escalating inflation in the country.

The OCCI noted that the “bold cost-push measures have further been compounded by the fast-declining rupee parity against the US dollar”. Besides, these measures were bound to have a severe impact on the cost of living of the people and the cost of doing business in Pakistan, which was partly a regional phenomenon as well, it said.

The OICCI said its members had also been perturbed by abrupt changes in the taxation regime — such as a super tax — in the recently announced Finance Bill and, more importantly, the rapid decline of the rupee in the last few weeks and days.

At the same time, the SBP has also been issuing various ad hoc measures to curb unnecessary import payments, and perhaps rightly so, the chamber said but insisted that all these actions, especially currency depreciation, were causing serious concerns and were shaking the confidence of OICCI members.

The letter said many OICCI members had investment plans in the pipeline and continued to promote further foreign direct investment (FDI) to the country. However, high taxation announced in the latest budget and the never-ending decline in the rupee’s value posed the danger of permanently damaging the country’s image as an attractive destination for FDI, it said.

Published in Dawn, July 22nd, 2022