The government’s policy of preferring external borrowing to run the economy is nudging Pakistan into a debt trap and economic managers of the country should focus on mobilizing domestic resources to stimulate the economy.

This was said by Mr.Zahid Maqbool, President, Islamabad Chamber of Commerce & Industry (ICCI) in a statement. He said that Pakistan has added almost $ 12 billion in external debt during the last two years, as against $ 2.6 billion in the previous seven years, which shows our reckless approach in piling up external liabilities.

He said with the increase in external debt, the debt servicing liability is mounting leaving hardly anything to spend on improving the country’s physical & human infrastructure and reducing poverty.

He said the country’s total debt-to-GDP ratio has crossed 61 percent during the outgoing fiscal year, breaching the 60 percent limit set under the Fiscal Responsibility and Debt Limitation Act.

Under these circumstances, there is a dire need to make a paradigm shift in our approach from preferring external borrowings to focusing on mobilizing internal resources, an area which seems to have been neglected so far.

He said one major source of mobilizing domestic resources is the strengthening of country’s stock markets. He said the well developed stock markets will serve the investors, corporates and economy by channeling public savings into productive investments.

Mr.Zahid Maqbool said that government should announce some tax incentives for investing in stock exchanges. He said a growing stock market will greatly facilitate the private sector in raising enormous amounts of capital to finance business expansion projects, especially at a time when interest rates of banks are very high.

He said that the repealed Income Tax Ordinance 1979 had provided suitable tax incentives on some investments instruments of stock market, which have now been withdrawn.

He called upon the government to revisit those tax incentives for restoring them in refined form so that stock market could attract maximum investment and play more effective role in mobilizing domestic resources for the development of our economy. This will also greatly reduce our dependence on external borrowings.