AS foreign debt sustainability has turned into a serious global challenge and several countries are facing the risk of default, the international community is focusing on providing impetus to an evolving new global financing agenda. That includes suspending World Bank debt payments by vulnerable states hit by natural disasters.

To ease the debt problem, the Paris Summit has set a target for multilateral development banks to leverage at least $100 billion a year in private sector capital when they lend.

Even if vigorously pursued, this proposal may take time to materialise during the cycle witnessed on a global scale, calling for a transformational change. For example, in the case of Pakistan, the business environment is not conducive to both local and foreign investment.

`We aim to build a strong corporate sector that is attractive to domestic and foreign investors, ensuring economic stability for our nation,` said the Chairman of the Securities and Exchange Commission Akif Saeed, at a symposium last week.

But the Overseas Chamber of Commerce and Industry finds it a bit disappointing that the FY24budget has effectively increased the corporate tax rate to 39 per cent from 29pc while the regional average is 25pc.

Then in an emergency meeting on June 26, the State Bank Monetary Policy Committee raised the policy rate to a record 22pc from the unchanged 21pc on June 12 following the amended budget FY24 approved by parliament on June 25 on the International Monetary Fund`s (IMF) persuasion.

This will increase cost-push inflation, discourage private investment, and increase interest payments on government ballooning domestic debts.

The IMF, however, has a different view. The Fund`s Mission Chief, Nathan Porter, says the amended budget FY24 broadens the tax base while opening up space for higher social and development spending.

Exchange Companies Association of Pakistan President Malik Bostan expects that the possible IMF agreement will strengthen the rupee to 270 against the dollar.

Sharing views with other leaders at the Paris Summit, Prime Minister Shahbaz Sharif said there was a need to rethink the global financial architecture to make it pro-growth. The IMF goals, he argued,could be better met through economic recovery.

The real issue in Pakistan is the eroding viability of a system to mobilise the country`s abundant labour power and natural resources to meet the people`s needs for goods and services as weII as produce enough export surpluses for the international market. That is the main reason for persisting macroeconomic imbalances.

The issue is how to manage stability with growth, as exclusive focus on stability does not go beyond fire-fighting while stifling economic growth.

In Pakistan, only one of the 22 IMF programmes entered has been fully implemented, indicating that they suffer from a practicability deficit. And the 23rd one is yet to come out of rough waters at the time this piece was being written.

However, multilateral lenders are reviewing their policies in view of the current ground realities. At the summit meeting, the World Bank announced it would ease financing for countries hit by natural disasters as IMF announced it had hit its target of making $100bn in special drawing rights available for vulnerable nations.

The World Bank and others said they would start adding clauses to lending terms that allow vulnerable states to suspend debt repayments when natural disaster strikes.

Some economists have called for new low-cost lending instruments to invest in building resilience among vulnerable populations.

In his remarks at a conference panel, the new World Bank President Ajay Banga outlined a `toolkit`, including offering a pause in debt repayments, giving countries the flexibility to redirect funds for emergency response, providing new types of insurance to help development projects and assisting governments build advance-emergency systems that allow suspending debt payments when the natural disaster strikes.

Without any meaningful structural reforms and in the prevalent debt-driven system, Pakistan`s foreign dependence is beyond sustainable.

Stating that the budgetary allocation for debt servicing skyrocketed from Rs1.15 trillion a decade ago to Rs7.3tr in FY23, analyst Dr Farrukh Saleem says this escalation indicates the progressive deterioration of the underlying financial condition.

Similarly, no serious effort is being made to trim the size of the federal government. It has 34 ministries, 48 divisions and more than 400 departments when all we need at the federal level are five ministries: finance, foreign, communication, defence and revenue, says Dr Saleem.

The spending on the electricity and gas sectors and commodity operations amounts to scores of billions, with the government struggling to grapple with the growing problem.

The government spending far exceeds its revenue with more taxes collected from inflation than economic activities. The Federal Board of Revenue is stated to have raised a record Rs7tr till June 26 against the revised budgeted target of $7.6tr.

On the global level, the fight against inequalities and the fight for the planet will only find answers with the international community`s unity, said French President Emmanuel Macron addressing the Summit for a New Financing Global Pact held in Paris and attended by some 40 leaders.

The Summit was organised with a view to boost crisis financing for low-income states and ease their debt burdens, reform post-war financial systems and free up funds to tackle climate change. •