Karachi: Despite the government’s announcements that it has made adequate arrangements for foreign exchange, there are fears of shortages of essential commodities in the country as overall export problems continue.
According to a research report, “There is a possibility of a sharp decline in the dollar, which could also hurt imports of essential commodities in the coming months and affect several food items, health care supplies and even petroleum oil and May lead to product depletion of lubricants (POL). Issued by Taurus Securities.
Shortage of raw materials and other supplies is affecting industrial activities on a large scale resulting in non-productive days as well as substantial increase in product prices. It includes major industries like automobiles, steel and textiles.
According to the report, passenger car sales fell 38 percent year-on-year during the first six months of fiscal 2023, while steel manufacturers, both long and flat, cut product prices by around Rs 23,000 per tonne and Rs 14,000 per tonne. What is the increase of Rs. per ton, respectively, in just one month. Although the government has assured the public of ample stocks of wheat in the country, hoarding and smuggling are affecting its supply due to which the prices of the commodity are increasing. Additionally, banks are reluctant to open letters of credit (LCs) to the oil and gas industry, which may result in shortages of POL products.
“Pakistan’s export issues are not being addressed properly and this has left the export industry stuck in the mud,” said Dr. Urwa Elahi, Additional Secretary General for Research at the Pakistan Business Forum (PBF).
Referring to a detailed report by PBF, he said that around 7 million people have lost their jobs in Pakistan’s textile industries due to declining exports. “Pakistan is already struggling to achieve fiscal balance as its imports far outstrip its exports.” “Exports fell for the second month in a row, down 18.3 percent from $2.9 billion a year ago, indicating that Pakistan’s economy is continuing to shrink. In contrast, imports rose 11.3 percent in November. to $5.25 billion, resulting in a monthly trade deficit of $2.88 billion. However, imports were 33.6 percent lower than November 2021’s $7.89 billion, reflecting a 42.5 percent decline in the annual trade gap,” Elahi explained.
“Although the coalition government is being credited with reducing the annual trade deficit, many economists believe that the fictitious policies being implemented by the current finance minister could harm the national economy in the long term. “The manufacturing sector needs imports to maintain its high efficiency. Otherwise, it will be difficult to meet the country’s revenue requirements,” he added.
Exports in the first five months of the current fiscal year fell 3.5 percent to $11.93 billion from $12.36 billion last year. “This indicates that the government will face difficulties in meeting the export target this fiscal year, which will further reduce the country’s revenue. It is now quite clear that the decline in exports “Backward exchange rate volatility was a major factor,” he said.
The government’s decision to eliminate duty drawback on local taxes has also created liquidity problems for the export industry. It is worth noting that Pakistan not only met its export target in 2021-22, but also crossed the psychological barrier of $30 billion, with revenue increasing by 26.6% to $31.85 billion from $25.16 billion. Done, noted the PBF researcher.
