ISLAMABAD: The automotive industry has laid off thousands of workers in recent months due to declining sales of vehicles and spare parts, the government’s ban on import of raw materials, a sharp fall in the value of the rupee and rising inflation.
Pakistan is facing its worst economic crisis to date, with foreign exchange reserves held by the State Bank of Pakistan (SBP) falling to $4 billion, barely enough to cover three weeks of imports, and The rupee is falling to historic lows against the US dollar. .
The country imposed restrictions on the import of raw materials last year to stem the outflow of US dollars, leading to a sharp drop in industrial output and people facing layoffs and unemployment.
Amid the worsening dollar crisis, commercial banks also stopped opening letters of credit (LCs), leaving importers struggling to arrange greenbacks for orders already in place.
Inflation, meanwhile, soared to more than 36 percent in April, the country’s highest since 1964.
“We have laid off thousands of workers in recent months because our production has practically stopped,” Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) chairman Munir Karim Bana told JEE News.
“There are no buyers now because the auto manufacturers have closed their plants.”
Bana said auto parts manufacturers were paying demurrage, a charge owed to a chartered ship owner for failure to load or discharge the ship within the stipulated time, as raw materials worth billions of rupees were stuck at Karachi port. .
PAAPAM supplies around 90% of local vehicle parts to the auto industry.
“We are paying interest on our loans from banks, our materials are depreciating but no one is listening to our complaints,” Bana said.
He added that income streams are drying up due to closure of production units.
“We were profitable and paying taxes to the state because all our sales are documented and taxes are paid,” he said. “But now we are bankrupt, and there is little chance of our industry recovering in the coming years.”
Prime Minister Shehbaz Sharif’s Coordinator for Trade and Industry Rana Ehsan Afzal said the automobile industry “cannot reach full efficiency until the IMF bailout program is restored” because it is dependent on imports and dependent on the dollar.
A staff-level agreement on the ninth review of the IMF bailout deal signed in 2019 has been postponed since November.
Afzal said that we have to protect our foreign exchange reserves by keeping an eye on the import of raw materials for the industry at this stage.
Commenting on the drop in sales and mass layoffs, the Prime Minister’s Coordinator called it “unfortunate,” while assuring that the government is “working around the clock to revive the economy.”
“Every new day is better than the last,” the official said. “Still we are ensuring minimum sustainability of the industry… This is a temporary phase in which we have to stick to some import restrictions for the vehicle industry, but when our reserves increase, we will I’ll see the boom. The auto industry again.”
Abdul Waheed, spokesman for the Pakistan Automotive Manufacturers Association, told Saudi that apart from the sale of auto parts, the sale of vehicles has also declined by nearly 70 percent in a year, while some manufacturing plants have been closed for months now. media outlet.
“We have non-productive days as car manufacturing plants remain closed due to various reasons including inflation, sales decline and import ban… Car prices have gone up due to sharp depreciation of the rupee and This led to a significant drop in demand,” he said. Waheed added that despite manufacturing plants undergoing temporary shutdown, companies are paying their staff.
“The future looks bleak in terms of employment opportunities in the auto sector,” said Waheed.
He further said that the current political and economic environment in Pakistan is not in favor of industrial production as rising inflation and devaluation of the rupee have broken the back of consumers.
