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Thursday March 28, 2024

Financial crunch: Traders hold political parties responsible for economic crisis

By our correspondents
July 29, 2022

KARACHI/ LAHORE: The Karachi Chamber of Commerce and Industry (KCCI) has held political parties responsible for the weakening economic position of the country, saying political stakeholders had turned a blind eye to the gravity of economic situation and its repercussions in future.

In a statement on Thursday, Businessmen Group Chairman Zubair Motiwala and KCCI President Muhammad Idrees expressed concerns saying they came to know that many businessmen were thinking of closing down their operations. “No one knows how low the rupee would drop to, and delay in the International Monetary Fund (IMF) programme is also spreading uncertainty in the market,” Idrees said.

He added that purchasing power of the common man had eroded due to high inflation, while many business units had complained that local markets were not buying from the production units as the buying power of masses had shrunk and people were concerned over the heightened uncertainty. “The utility prices are being enhanced unprecedently whereas the rupee-dollar parity has added fuel to fire.”

Motiwala said the business community was facing cost uncertainty on goods they are importing, especially those with 90 or 120 days credit, and also about fate of the goods they had already sold in the market. He warned that many businessmen were thinking of closing down their businesses, if not forever then on a temporary basis, and most of them were even looking for a second option of shifting to a worthwhile place to do business.

He lamented that banks were making humongous amount of money on foreign exchange transactions while the State Bank of Pakistan (SBP) had not been effectively regulating them. “Letter of credits (L/Cs) for even the most essential items, which are necessary to keep the wheels of the industry running, requires formal approval of the SBP. The central bank has been quite strict with the business community, but quite relaxed when it comes to controlling the banks.”

BMG General Secretary AQ Khalil stated that irrespective of the IMF’s restriction on interventions in forex market, the political parties could bring some stability in the rupee by setting aside their political differences and minimise the political instability in the larger national interest. He urged all political parties to show unity on economic issues.

The KCCI officials said the freefall of the local currency was creating issues for international buyers in deciding about the right time to buy for profit. “Due to this reason, the orders of autumn and winter, which are usually sold before or in July, are still pending, making it difficult for the units to continue their production prior to September.” They also offered to sit down with the political parties to create a framework to achieve feasible working conditions for the business community.

Meanwhile, Lahore Chamber of Commerce and Industry (LCCI) urged the government to ensure political and economic stability, saying all stakeholders, including politicians, institutions and the central bank should play their role to save the country.

While addressing a press conference at the LCCI, its president Mian Nauman Kabir said it was a matter of concern that nobody was ready to listen to the hue and cry of the business community, which is “the ultimate loser of the ongoing scenario.” He said political instability, lack of interest by the acting governor of State Bank of Pakistan, unjustified taxes in electricity bills, rising inflation, trade deficit, rupee devaluation, and lack of cooperation from the banks were hindering smooth running of businesses.

Kabir added that the inter-bank dollar rate had exceeded Rs237, which means that the rupee depreciated by more than 12 per cent during the last one month and 25 per cent if calculated over three months, he stated.

The LCCI president said they had extended cooperation to the government, but have so far received no satisfactory response. Kabir said they had accepted the term of fixed tax, but the government started collecting sales tax in the electricity bills along with fixed tax, he complained.

He stated that the political instability had pushed economic issues behind the scene, adding that at a time when international community had kept a close eye on Pakistan, which is one of the most important countries of South Asia, there is a dire need for political harmony to give a good message to foreign investors, he urged.