APTMA calls for political stability to avoid economic collapse

KARACHI: All Pakistan Textile Mills Association (APTMA) on Friday urged all political leaders and policy-makers to develop a consensus on how to navigate from the situation of extreme distress and pull the economy out of current downward spiral.

Chairman APTMA Rahim Nasir said political instability 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,” Nasir said.

“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.”

APTMA chairman said the exchange rate is a major cause for concern for businesses and currency 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,” he said.

Pakistan has been under the grip of debilitating exchange rate for quite some time now. The value of one dollar reached its highest point ever on July 27, 2022 when it hovered at around 237 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,” Nasir said.

He said it is time to abandon the widespread misconception that exporters welcome rupee devaluation. “The central bank and government should concentrate on achieving an exchange rate 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 percent cost.” Hence, focusing upon dollars generated through exports are far better option than bonds, he added.

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 percent.

The current account deficit increased by 517 percent in FY22 compared to FY21, he pointed out and urged that steps should be taken to reduce the import bill by at least $5 billion, especially energy’s, through ensuring energy efficiency.

Shockingly, petroleum imports increased by 50 percent 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 and declare an energy emergency and introduce measures to conserve energy which can save Pakistan’s economy in more ways than one.

He suggested that an aggressive conservation would cut import bills by more than 25 percent and would saves $6 billion. “Implement both price and administrative measures to curtail consumption and curtail domestic gas supply to reduce consumption and waste by 18 percent UFG.”

Nasir said single point energy supply to domestic gas and fast track calibration of cooking burners to save 200 MMCFD of gas/RLNG and improve documentation.