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Category: Trade & Industry

Trade & Industry news covering business developments, industrial growth, manufacturing trends, and economic policies shaping domestic and global markets.

  • Foreign investors discuss economic situation with SBP

    Foreign investors discuss economic situation with SBP

    KARACHI: Foreign investors operating in the country have discussed ongoing economic situation with the State Bank of Pakistan, a statement said on Tuesday.

    The members of Overseas Investment Chamber of Commerce and Industry (OICCI), the body representing foreign investors and multinational companies in Pakistan, met with Dr. Murtaza Syed, Acting Governor, State Bank of Pakistan (SBP), Dr. Inayat Hussain, Deputy Governor, SBP and Sima Kamil, Deputy Governor, SBP for a discussion on urgent fiscal and monetary policy measures that need to be taken to help stabilize Pakistan’s economy.

    READ MORE: SBP introduces foreign currency, rupee value business accounts

    Ghias Khan, President OICCI and Abdul Aleem, Secretary General, OICCI led the discussions and raised member concerns related to the pre-approval procedure of LCs for import of machinery and spare parts, timely remittance payments, approval exemptions of shipping values being too low, and other operational issues. It was stressed upon the SBP leadership to set timelines so that industry supply chain is not compromised.

    The SBP team gave a comprehensive overview of the current economic situation and the planned strategy to tackle issues in 2023. Pakistan is primarily a consumer-driven economy with consumption driving up to 95 per cent of the GDP. The SBP team was confident that Pakistan’s problems were temporary and urged the OICCI members to work on improving exports to help balance the exchange rate fluctuations and currency depreciation.

    READ MORE: Rupee makes recovery against dollar for 3rd straight day

    Ghias Khan stated: “This meeting was a much needed first step towards the recovery of Pakistan’s economy. It is imperative that we implement cogent measures to halt our pattern of circular debt. The SBP has always played a critical role in stabilizing Pakistan’s economy, and I am confident that under Dr. Murtaza Syed’s leadership we will be able to withstand the current economic climate while charting a path for growth.”

    READ MORE: OICCI suggests duty cut on locally manufactured cars

    Dr. Murtaza Syed commented, “SBP is taking tough measures and making difficult decisions to help avert the economic crisis. Global inflationary pressures coupled with a procyclical expansionary fiscal policy during a pro-cyclical period is one of the main reasons Pakistan is at this crossroads today. Once these measures are implemented and the IMF loan is received, the pressures on the economy will ease, specifically with regards to the depreciating Rupee.”

    OICCI serves as a platform to promote foreign investments and plays a major role in the growth of commerce and industry in the country. Collectively, OICCI invested USD 2.4 billion last year, contributing one-third of the country’s total tax collections.

    READ MORE: Return filing be made mandatory for account holders

  • Miftah assures shopkeepers of removing multiple taxes on electricity bill

    Miftah assures shopkeepers of removing multiple taxes on electricity bill

    KARACHI: Finance Minister Miftah Ismail on Tuesday assured shopkeepers and small retailers of removing all taxes being collected through electricity bills once the fixed tax regime is implemented.

    Responding to demand raised by retailers and shopkeepers, the finance minister promised to remove all the other taxes from the electricity bills once the fixed tax regime is activated to avoid double taxation, as quoted by a press release issued by Karachi Chamber of Commerce and Industry (KCCI).

    “Only GST on electricity consumption will be applicable and at the year end, they will be required to submit a document to intimate the tax authorities about the payment of taxes during the year,” Miftah Ismail was quoted as saying.

    READ MORE: FTO investigates tax collection through electricity bills

    Earlier, the KCCI office bearers highlighted that the government is already charging hefty multiple taxes on electricity bills on commercial units including Electricity Duty, General Sales Tax (GST), Extra GST, Further GST and Income Tax U/S 235 of the Income Tax Ordinance, 2001.

    In response to the protests by small retailers against the fixed retailers’ tax introduced in Finance Act 2022, Finance Minister Miftah Ismail announced to reduce the fixed tax rate from Rs. 6000 per month on non-filers to Rs. 3000 on electricity bills and exempted consumers whose electricity bills was up to 150 units.

    To voice the concerns of the small retailers, Chairman BMG Zubair Motiwala and President KCCI Muhammad Idrees called a meeting of business associations and held talks with Finance Minister Miftah Ismail and Chairman FBR on Zoom.

    READ MORE: Withdrawal of sales tax through electricity bills demanded

    During the session, they expressed concerns over the high rate of taxes being charged through electricity bills. They argued that commercial consumers are already paying multiple taxes in their monthly electricity bills including fuel adjustment surcharge, electricity duty, income tax, general sales tax, extra GST, further GST besides electricity charges, and over and above a new fixed tax has been levied on all commercial consumers which is unsustainable.

    In the meeting held at Karachi Chamber of Commerce and Industry between the Finance team and small traders, the Finance Minister Miftah Ismail promised to waive multiple taxes on electricity bills and also agreed to consider the demands of small traders to increase the threshold.

    After taking the leadership of small shopkeepers on board, Chairman Businessmen Group Zubair Motiwala and President KCCI Muhammad Idrees urged the government to accept the genuine demands of small businessmen who are already struggling to make both ends meet and increase the suggested threshold of 150 units of electricity consumption from fixed tax regime and remove other taxes from electricity bills.

    READ MORE: Tax through electricity connections on retailers, service providers

    General Secretary BMG & Former President KCCI AQ Khalil stressed on removing other taxes and consider all NTN holders as filers under the fixed tax regime.

    In the Finance Act FY22, the government imposed a fixed tax regime for retailers whereby even the unregistered consumers with zero or minimal units were getting Rs. 6000 monthly tax on electricity bills. After severe hue and cry from small traders against the new fixed tax regime for retailers, the Finance Minister Miftah Ismail announced a revision in the scheme under which up to 150 units of electricity consumption were exempted from the tax and removed the condition to charge double amount of tax from unregistered traders, making it full and final tax and also granted immunity from tax notices, audits and raids by FBR officers.

    To address the concerns, KCCI held an urgent meeting with a delegation of small businessmen receiving fixed tax on electricity bills headed by Abdul Majeed Memon Chairman, Special Committee for Small Trader of KCCI and Talat Mehmood Co Chairman Special Committee for Small Traders accompanied by representatives of several market associations of Karachi.

    READ MORE: FBR explains income tax on export of services

    KCCI had invited all the associations of Karachi and vast majority of them participated in this meeting where they unanimously agreed to the decision of Chairman BMG Zubair Motiwala that the tax may be implemented on the basis of units of consumed where up to 250 units will be exempted from tax and those consuming above 250 units of electricity may be charged fixed tax accordingly. It was also unanimously agreed that all the other taxes including Income Tax, GST Extra GST and Further GST will be replaced with this single fixed tax as full and final tax liability.

    READ MORE: FBR restores 100% depreciation deduction

    The delegation comprised of Muhammad Akram Rana Vice Chairman All Karachi Tajir Ittehad, Asif Gulfam Chairman Alliance of Arambagh Market, Dilshad Bukhari Saddar Jama Mall, Mehboob Azam President All Pakistan Small and Cottage Industry, Mehmood Hamid General Secretary All Pakistan Small Traders and Cottage Industry, Muhammad Feroz President Saddar Cooperative Market, Muhammad Fayyaz Chairman Sind Tajir Ittehad Old City Area, Rafiq Jadoon President All Pakistan Anjumane Tajiran (Bolton Market), Ilyas Memon President Tariq Road Trader Alliance, Nadeem Ahmed Khan President All Karachi Plastic Bags Manufacturing Association, Zulfiqar Shiwani Regional President Sindh Tajir Ittehad, Jamil Parachi Chairman Sindh Tajir Ittehad, Mirza Sadiq Baig Vice President Sindh Tajir Ittehad, Sheikh Muhammad Irshad Jama Alliance,  Chaudry Aamir Ali Khan President Car Association, Abdur Raheem Car Dealers Association, Abdul Qadir Noorani General Secretary Joria Bazar Market, Javed Shams Daniyal President Anjuman Tajiran e Sindh – Karachi Division, Abdul Samad Khan SVP Saddar Alliance of Market Association, Abdullah Batra Chairman Orangi Traders Association, Arif Patel Goldsmith among others. The members of the Managing Committee of KCCI also attended the meeting.

  • APTMA suggests measures to avoid Pakistan’s economic collapse

    APTMA suggests measures to avoid Pakistan’s economic collapse

    KARACHI: All Pakistan Textile Mills Association (APTMA) on Friday suggested the government to avoid economic collapse.

    The APTMA in a statement said that Pakistan is currently on the brink of economic collapse. With depleting foreign currency reserves, rising inflation, the exchange rate in free-fall and irrationally high interest rates, the country is headed towards a path similar to the economic downfall of Sri Lanka.

    “We at APTMA are pushing for all leaders and policymakers to develop a consensus on how to navigate from this situation of extreme distress and pull the economy out of this downward spiral. We recommend the following key areas for reform,” according to the statement.

    The association said a lack of political stability is a serious impediment to economic progress. Not only does it shorten policymakers’ horizons leading to suboptimal short term macroeconomic policies, but it is also the cause of frequent policy U-turns and leads to non-completion of ongoing projects. Stability and consistent policy implementation are crucial for economic growth and for the export sector to thrive and contribute dollar earnings to stabilize the Balance of Payments for a sustainable economic outlook.

    READ MORE: Govt. halts gas supply to export industry: APTMA

    The exchange rate is a major cause for concern. The ER instability has significant negative relationship with sectoral exports of Pakistan such as textile. A negative indication indicates that a rise in relative price is to blame for the decline in export demand. Pakistan has been under the grip of debilitating ER for quite some time now. The value of one dollar reached its highest point ever on 27th July 2022 when it hovered at around 237 Pakistani rupees. In the long run, the large devaluation of the rupee is worst for exporters especially textile exporters because it raises input costs, making exports less competitive.

    It is time to abandon the widespread misconception that exporters welcome rupee devaluation. The central bank and government should concentrate on achieving an ER that is competitive in the market and achieves actual exchange parity. Dollars earned through exports are the most sustainable with the added benefit of no compulsion to return them, no interest, and the cheapest with only 3-4% cost. Hence, focusing upon dollars generated through exports are far better option than bonds.

    Moreover, the need for a long-term policy featuring lower interest rates cannot be underestimated, and its implications for a brighter economic future which generates foreign currency, jobs and international recognition cannot be denied. We need more investments in Pakistan, alongside holistic policy reforms that lend confidence to investors and the markets. This need cannot be met with an interest rate of 15 per cent.

    READ MORE: APTMA demands continuation of energy tariffs

    Roadblocks to entrepreneurship and innovation need to be mitigated so that we can empower our youth and our disenfranchised talent to bring about a grassroots level economic revolution. We must rid our policymaking of the economic formula whereby interest rates are raised in order to stabilize the economy, as this can only be effective in certain Highly Developed Economies: a title which Pakistan’s economy is a long way off from attaining. The best mechanism is through supply-side interventions, bringing more individuals into the economy and increasing the labor supply – for which entrepreneurship and financial inclusion is critical.

    The current account deficit increased by 517 percent in FY22 compared to FY21. To counter the dangers of our mounting debt, we must immediately take the following steps:

    1) Reduce the import bill by at least $ 5 billion, especially energy’s, through ensuring energy efficiency.

    2) Shockingly, petroleum imports increased by 50 per cent in June 2022 in volume terms. Pakistan imported petroleum products worth $24 billion last year. Gas needs to be used for productive purposes only. At present gas is being supplied to ceramics, steel and glass also.

    3) Declare an energy emergency and introduce measures to conserve energy which can save Pakistan’s economy in more ways than one:

    READ MORE: Prolong Eid holidays to adversely affect exports: APTMA

    • Aggressive conservation – cuts import bills by more than 25 per cent and saves $6 billion.

    • Implement both Price & Administrative measures to curtail consumption.

    • Curtail domestic gas supply to reduce consumption & waste by 18 per cent UFG.

    • Single point Energy supply to Domestic Gas.

    • Fast track calibration of cooking burners to save 200 MMCFD of Gas/RLNG.

    4) Improve documentation and inclusion of unbanked persons

    5) Reduce external pressure ‘hawala’ from $10 – $5 billion by documentation as hawala can survive on undocumented sector only; introduce scheme whereby State Bank of Pakistan opens up bank accounts for those currently having no account with a pre-approved overdraft facility of Rs 10,000 that can be used as seed money for entrepreneurship.

    6) Revamp and improve the export paradigm by ensuring competitive tariffs and improved facilitation.

    Furthermore, we must take steps to add value in our exports and thereby improve global perceptions of Pakistan. This would require an environment that facilitates exporting industries to focus on quality improvement through new processes, thereby developing new products and entering fresh markets.

    With a myopic focus on short staple fiber raw cotton, we rely on a shrinking market while neglecting the rapidly expanding market for MMF. The MMF tariff regime effectively prevents Pakistan from aligning its products in tandem with the rest of the world. The duty protection given to obsolete plants in Pakistan is denying the Pakistani industry any chance to compete in this booming market, internationally or domestically. We must do away with such hurdles so that progress can be made in value addition, diversification and market expansion.

    Lastly, leaders must prioritize export-led economic growth. Enhanced exports enable the inflow of foreign currency to finance imports, service debt, stabilize exchange rates and to overcome the persistent problem of the balance of payment deficit.

    READ MORE: APTMA condemns lobbying for Indian yarn import

    The textile sector has performed exceptionally well in the last 2 years. Textile exports have increased by 43 percent in FY22 as compared to FY18. Textile industry has invested a sum of $5 billion over the past few years in new plant & machinery and upgradation.

    Further expansion and increase in exports are limited by the inconsistent availability of energy at Regionally Competitive Energy Tariffs (RCET). Given that the past export spur occurred due to the priority of the government to provide regionally competitive terms for the sector, this policy must be consistently maintained in the future to enable economic stability and subsequent growth.

  • Political parties responsible for Pakistan economic crisis: KCCI

    Political parties responsible for Pakistan economic crisis: KCCI

    KARAHI: Karachi Chamber of Commerce and Industry (KCCI) on Thursday accused political parties of Pakistan for current economic crisis.

    In a joint statement issued by Chairman Businessmen Group Zubair Motiwala and President KCCI Muhammad Idrees expressed concerns as they felt that political parties are not understanding the gravity of the situation of the economy and the repercussions on the future of the country.

    READ MORE: Karachi Chamber demands declaring rain emergency

    Chairman BMG Zubair Motiwala warned that many businessmen are thinking of closing down their businesses, if not forever then on a temporary basis and most of them are even looking for the second option of shifting to a worthwhile place to do business.

    He lamented that banks were making humungous amount of money on foreign exchange transactions while State Bank of Pakistan had not been effectively regulating them due to which the difference between the interbank rate and banks’ negotiated price has crossed Pak Rupees10 a dollar and even then banks are not releasing dollars.

    READ MORE: KCCI demands release of stuck up containers

    “The business community faces cost uncertainty on the goods they are importing especially those which are on 90 or 120 days credit and about the fate of the goods they have already sold in the market. L/Cs for even the most essential items which are necessary to keep the wheels of industry running require former approval of SBP which has been very strict with the business community but it is quite relaxed when it comes to controlling the banks,” he added.

    Chairman BMG Zubair Motiwala, Vice Chairmen BMG & Former Presidents KCCI Tahir Khaliq, Haroon Farooki, Anjum Nisar, Vice Chairman BMG & Former Senior Vice President KCCI Jawed Bilwani and General Secretary BMG & Former President AQ Khalil, stressed upon the need to have political stability in the country.

    READ MORE: KCCI demands implementation of Riba free banking

    General Secretary BMG A Q Khalil stated that irrespective of the IMF’s restriction on interventions in Forex market, the political parties can bring some stability in the Pak Rupee by setting aside their political differences and minimize the political instability in the larger national interest. He urged all the political parties to show unity the way they have been showing solidarity in several issues of national security and in case of Kashmir cause.

    President KCCI Muhammad Idrees stated that the utility prices are being enhanced unprecedently where rupee dollar parity has added fuel to fire. “And no one knows how low the rupee would drop while agreement with IMF has added even more uncertainty. Purchasing power of the common man has eroded due to high inflation while many business units complained that local markets are not buying from the production units as the buying power of the masses has eroded and people are concerned over the heightened uncertainty,” he added.

    READ MORE: KCCI appeals rescuing small traders in Catch-22 situation

    They appealed to all political parties to sit down across and make an understanding as to how the economy should function and stabilize the Rupee to its real value. This kind of freefall of the local currency is making international buyers confused as to what is the right time to buy for profit. Due to this reason, the orders of autumn and winter, which are usually the sold before or in July are still pending making it difficult for the units to continue their production prior to September. KCCI even offered to sit down with the political parties to at least create a framework so that minimum working conditions are achieved for the businesses to operate smoothly.

  • Falling rupee to collapse industry: PYMA

    Falling rupee to collapse industry: PYMA

    KARACHI: Pakistan Yarn Merchants Association (PYMA) on Monday expressed concerns over massive depreciation of Pakistan Rupee (PKR) and fear it may collapse the local industry.

    PYMA Chairman Saqib Naseem, and Vice Chairman PYMA Sindh and Balochistan Muhammad Junaid Teli in a joint statement expressed disappointment on the part of the State Bank of Pakistan (SBP) for not taking effective measures to stop the continuous increase in the value of the dollar, saying that soaring dollar risks SMEs, industries and businesses.

    READ MORE: PYMA demands withdrawal of sales tax through electricity bills

    PYMA office-bearers demanded the central bank to take concrete steps to stabilize the value of the rupee as businesses and industrial activities were badly affected, especially small and medium enterprises (SMEs) were facing the biggest financial losses.

    Depreciation of rupee and continuous increase in value of dollar has increased the cost of doing business due to which the business and industrial community is facing severe difficulties.

    READ MORE: PYMA rejects customs valuation for filament yarn

    They further said that the appreciation of the dollar is most affecting businesses and industries that rely on imported raw materials to sustain production activities. Therefore, due to the increase in the value of the dollar, while the cost of importers has increased, the industries are also facing an increase in the cost of production in the form of expensive raw materials, which is also having a negative impact on exports.

    Saqib Naseem, Junaid Teli demanded the State Bank of Pakistan to take practical measures to stabilize the rupee and prevent the rise in the value of the dollar to save the business and industries, especially SMEs from being destroyed, and the country to come out of economic crises and to reduce the increasing cost of business and industry.

    READ MORE: PYMA seeks duty, taxes cut on yarn in budget 2022/2023

    PYMA office-bearers expressed apprehension that if the central bank doesn’t play its role in stabilizing the rupee, the survival of businesses and industries, including SMEs, will be at risk.

  • PYMA demands withdrawal of sales tax through electricity bills

    PYMA demands withdrawal of sales tax through electricity bills

    KARACHI: Pakistan Yarn Merchant Association (PYMA) on Thursday demanded the government of immediate withdrawal of sales tax collection through monthly electricity bill.

    Saqib Naseem, Chairman Pakistan Yarn Merchants Association (PYMA), Muhammad Junaid Teli, Vice Chairman, Sind & Balochistan region, has rejected the imposition of Rs 6,000 tax on small business’s electricity bills, and demanded Finance Minister Miftah Ismail to withdraw the tax, requesting that stakeholders must be consulted before imposing any tax.

    READ MORE: PYMA rejects customs valuation for filament yarn

    PYMA office-bearer said that imposing taxes on small businesses, shops is completely unfair, especially at a time when the rupee is constantly depreciating and the dollar is rising.

    Due to which the cost of doing business has increased enormously, and it is becoming very difficult for the business community to do business.

    READ MORE: PYMA seeks duty, taxes cut on yarn in budget 2022/2023

    They termed the excess utility charges as a cause of cost increase and said that the business community is very worried due to the expensive electricity, and now imposing a tax of Rs 6,000 on electricity bills will kill small traders and businesses, resulting in the unemployment of lakhs of workers.

    Saqib Naseem, Junaid Teli requested Finance Minister Miftah Ismail not to impose excessive burden on traders considering the current economic situation.

    READ MORE: CGT exemption on private company shares suggested

    In the best interest of the economy, withdraw the decision to impose a tax of Rs 6 thousand on small businesses, shops.

    Otherwise, neither the business nor the economy will survive, but we will reach a crossroads where it may not be possible to revive the economy.

    READ MORE: KTBA proposes up to 20% capital gain tax on real estate

  • Rupee depreciation disaster for industry: SITE Association

    Rupee depreciation disaster for industry: SITE Association

    KARACHI: SITE Association of Industry on Thursday said that the continuous decline in rupee value against the dollar has brought the industry at verge of collapse.

    Abdul Rasheed, President, SITE Association of Industry, in a press statement, expressed serious concerns over the silence of State Bank of Pakistan in controlling rupee devaluation.

    READ MORE: SITE Association demands reversing policy rate at 7%

    He demanded the central bank of taking steps to control rupee-dollar parity.

    On Thursday, the dollar touched the highest ever level of Rs228 which is having adverse impact on the business activities in the country and the industries in particular, are now at the verge of collapse due to constantly increasing cost of production.

    SITE President said that despite the demand of the business community to control rupee devaluation, no effective steps were taken by the State Bank of Pakistan.

    READ MORE: SITE Association signs MoU for tax return filing

    Instead the State Bank of Pakistan stated that the economic situation of the country is better. This statement of the SBP is contrary to ground realities as business and industries are suffering the most due to increasing dollar value.

    Raw material is imported to meet the requirements of local industries. Due to costlier dollar value, the imports have also become costlier, thereby increasing production cost and making it difficult to run industries.

    READ MORE:SITE Association hails FBR chairman’s no bank account freezing decision

    Abdul Rasheed added that the government is focusing only on getting a loan from the IMF without considering how to refund the IMF loan when there will be no industry and no tax collection. In the absence of adequate tax collections, the economy will collapse.

    Drawing attention of the federal government towards the gravity of the matter, Abdul Rasheed demanded to control of rupee devaluation and flight of dollar to avert its negative impact on industries and economy as a whole.

    READ MORE: Key policy rate goes up to 9.75%; SBP raises 250bps in less than month

  • KATI surprised over Govt. mysterious silence over declining economy

    KATI surprised over Govt. mysterious silence over declining economy

    KARACHI: Korangi Association of Trade and Industry (KATI) on Wednesday expressed surprise over the mysterious silence of the present government regarding economic downfall.

    (more…)
  • NKATI asks SBP to stop free-fall in rupee value against dollar

    NKATI asks SBP to stop free-fall in rupee value against dollar

    KARACHI: Industrialists of North Karachi Trade and Industry (NKATI) have urged the State Bank of Pakistan (SBP) to stop free-fall of rupee against the US dollar.

    In a statement, NKATI President Faisal Moiz Khan has urged the State Bank of Pakistan (SBP) to take measures for stabilizing the local currency as dollar breached Rs226 level in the interbank foreign exchange market.

    READ MORE: NKATI launches industrial area beautification

    “The SBP should adopt effective strategies to stabilize the rupee and curb the continued appreciation of the dollar,” he added.

    President NKATI said that rising the dollar will have very negative effects on the industrial production activities while the country’s economy will also be badly affected and a storm of inflation will come.

    The ongoing political ups and downs in the country are in place but the central bank needs to play its role as a regulator to prevent the dollar from soaring and the rupee from falling.

    READ MORE: NKATI urges PM Imran to reduce petroleum prices

    Moiz said that the continued appreciation of the dollar against the rupee has led to an enormous increase in industrial costs, making Pakistani products less competitive in export markets and unsustainably increasing commodity prices in domestic markets.

    “The appreciation of the dollar has more than doubled the cost of industrial raw materials, making it difficult to sustain production activities, and the industrial community fears that if the rupee continues to depreciate and the dollar continues to rise, timely fulfilment of export orders will not be possible,” he informed.

    READ MORE: Pakistan raises petrol price to record high at Rs160/liter

    NKATI president further said that the energy crisis, high rates of electricity, gas, taxes have already significantly increased the cost of production and now the continuous increase in the value of the dollar will sink the industries, which will lead to flood of unemployment and domestic exports will also be affected, so the central bank should adopt a strategy to curb the dollar price hike, otherwise it will become difficult to run the industries.

    READ MORE: NKATI expresses concerns over gas disconnection

  • Businessmen Panel suggests measures to avert economic crisis

    Businessmen Panel suggests measures to avert economic crisis

    KARACHI: The Businessmen Panel (BMP) has suggested measures to the government to avert prevailing economic crisis.

    In a statement BMP Chairman Anjum Nisar said that the caution of the International Monetary Fund (IMF), Fitch and Moody’s Rating Agencies have also consistently been raised by the business community, urging the authorities that instead of passing on the blame to the previous governments’ miss-governance a serious and sustained attempt should be made to strengthen the economy, slashing current expenditure and raising revenue from direct taxes which still account for less than 35 per cent of all projected collections as per the budget 2022-2023.

    READ MORE: FPCCI warns factories closure as rupee crashes against dollar

    Nisar, who also served as former president of Pakistan Chambers of Commerce and Industry (FPCCI), suggested the government to use the available monetary policy tools wisely, stressing the need to adopt a holistic approach aimed at developing all economic, agricultural and industrial sectors in order to support the growth of the country.

    He said that there is a need to devise a comprehensive strategy to promote the industry on immediate basis which will not only support the manufactures but also increase our export.

    Nisar hoped that the government would pursue radical economic reforms through a long-term stable administration.

    READ MORE: FPCCI demands 10% cut in petroleum prices

    Instead of doing the usual there is need to raise revenue from those having ability to pay or, in other words, from direct taxes which as per the budget 2022-2023 account for less than 35 percent.

    The BMP has been suggesting to the government to undertake major current expenditure cuts that require a major sacrifice from major recipients as well as reforms in all major sectors.

    These measures would not only decrease the pressure to generate higher revenue from indirect taxes like petroleum levy, also decreasing the need to borrow externally which is estimated at 36 billion dollars this year alone that in turn would reduce debt servicing costs.

    READ MORE: FPCCI denounces super tax imposition

    He demanded the government to offer special package of power and gas tariffs for rapid industrial growth on the pattern of China. As a result of high tariffs and taxation, cost of production is increasing and cannot compete in global market thus badly hampering export substantially.

    Moreover, it is essential to have an agricultural policy that increases the supply of raw material to agro-based industries, both domestic and foreign, such that it can help domestic textile producers regain lost competitiveness in the world market.

    He said that more concerning is Moody’s projection that the central bank would continue to increase rates over 2022 because of ongoing elevated inflationary pressures.

    There is elevated inflation that can be laid at the doorstep of the Fund’s prior conditions due to three reasons. First, the policy rate in this country has little if any impact on headline inflation, which was 21.3 percent for June but does impact on core inflation that registered 11.5 percent for June while the weekly sensitive price index 33.12 percent for the week ending 14 July 2022.

    READ MORE: FPCCI identifies tax anomalies in budget 2022-2023

    In other words, raising the policy rate to check headline inflation is unlikely to bear fruit for such a linkage does not exist in this country.

    Second, inflation is also imported due to the eroding rupee which has been taking a severe battering attributable to rising political uncertainty but it is also partly due to an undervalued rupee.

    He said that the rise in the policy rate will impact on the input costs of the large-scale manufacturing sector that is a significant contributor to not only the GDP, which has an impact on tax collections, but also to employment levels.

    The Fund’s insistence on taxing more, a part of the Finance Act 2022, would erode their purchasing power considerably.

    READ MORE: Move to legalize cryptocurrency trading in Pakistan

    Quoting the data, he said the current account deficit July-May 2022 is $15.2 billion which is a source of serious concern for two reasons.

    First, because while in 2018 the country was not yet on a Fund program and therefore had the entire program period of 39 months to implement the conditions, though the then economic team leaders did not opt for this approach, yet today the onus of harsh upfront conditions is all the greater because the country is at the tail end of the program period, and this is in spite of the fact that the Fund has granted an extension of around nine months.

    He said that the fiscal consolidation demands by the Fund have been adequately met in the Finance Act 2022. Nisar said that another rating agency, Fitch, has followed in the footsteps of Moody’s by revising its outlook on Pakistan to negative from stable.

    Fitch said, among other things, that there are considerable risks to the IMF program’s implementation and to Pakistan’s access to the external finance after June 2023.