ISLAMABAD: The All Pakistan Business Forum (APBF) has stressed the need for taking serious measures, as the current economic situation, marred by depleting foreign reserves, has also forced commercial banks to be selective in opening LCs even for sectors such as healthcare, as it has been unable to open Letters of Credit (LCs) as per its usual banking cycle.
APBF President Syed Maaz Mahmood lamented that the economists foresee an imminent humanitarian and healthcare crisis in Pakistan unless prompt actions are taken by the State Bank of Pakistan, Ministry of Finance and other institutions to avert the disaster.
He said that the rupee still continues to witness volatile trend in the process of trading against dollar and other major currencies. He observed that having a clear policy to curb the volatility in exchange market, the central bank should be fully geared to act and monitor the movements more vigilantly and should be ahead of the curve as they have more information than an average market player.
APBF Chairman Ibrahim Qureshi observed that the foreign exchange reserves held by the central bank fell to $4.5 billion after Pakistan returned over $1 billion loans of two foreign commercial banks, hardly enough to finance 25 days of import. Referring to the reports, he said that two separate repayments of $600 million and $415 million have been made to two Dubai-based commercial banks, according to reports. After the loans repayments, Pakistan is left with less than 25 days of import cover.
Ibrahim Qureshi observed that the economic activities in the country have already been severely affected due to depleting reserves, devaluation of local currency and non-opening of letter of credits (LCs) for private companies. Major industries, including car manufacturing companies, have temporarily closed their plants due to import restrictions.
According to reports, Pakistan is expecting to raise around $1.5 to $2 billion worth of funds in foreign aid during Geneva Conference to be held next week for the country’s flood victims. Besides, efforts are also underway to arrange loans from Saudi Arabia and China. It is expected that Pakistan and International Monetary Fund will hold discussion next week for the completion of the pending 9th review of the program.
Maaz Mahmood said that the 9th review talks have been pending since Oct last year, resulting in the withholding of a $1.1 billion loan tranche. Pakistan is keen to complete the 9th review so that the World Bank and Asian Infrastructure Investment Bank (AIIB) may also release their loans.
He said that Pak Suzuki Motor Company Ltd has extended plant shutdown from Jan 9-13 due to a continued shortage of imported parts. Due to the continued shortage of inventory level, the management of the company has decided to extend the shutdown of the automobile plant from January 9, 2023.
Earlier, the company suspended production activities from Jan 2-6. The firm stated that its supply chain is affecting due to restrictions of the State Bank of Pakistan (SBP).
The export consignments are affecting due to the conditional permission, said the company, adding that the restriction damaged the inventory. Previously, the Indus Motor Company had announced to shut down its manufacturing plant for 10 days due to the imposition of a ban on the imports of completely knocked down kits by the central bank.
Pakistan’s biggest agricultural machinery manufacturer, Millat Tractors, said that it would remain closed from January 6 till further notice, citing reduced demand and cash flow problems. A number of auto part vendors have suspended operations in recent months, citing reduced demand and import curbs imposed by the State Bank of Pakistan (SBP) – that were lifted last week – among other issues. Some textile companies have also partially suspended production recently due to demand destruction and market conditions.
Moreover, market rumors of a possible default by Pakistan are also making rounds but the government remains optimistic that Saudi Arabia will offer crucial support for foreign exchange reserves.