LAHORE
As the country has surprisingly reported a 19-month-low current account deficit (CAD) for Nov 2022, the Pakistan Industrial and Traders Associations Front (PIAF) has warned the authorities that the balance of accounts should not be at the cost of industrial growth, as significant reduction in imports through administrative controls came at the cost of economic growth, which is constantly declining.
PIAF Chairman Faheem ur Rehman Saigol, in a joint statement along with senior vice chairman Nasrullah Mughal and vice chairman Tahir Manzoor, observed that the State Bank reported that the current account deficit was 86% lower at $276 million in Nov compared to $1.92 billion in the same month of last year due to huge fall in imports while exports posted a marginal growth.
Faheem Saigol stated that the government’s strict import policy along with high cost of doing business owing to multiple increases in fuel cost and energy tariffs have almost halted the industrial production.
He complained about the persistent delay in import of raw material and said that businesses are shutting down, triggering unemployment in the country. Cumulatively, in the first five months (July-Nov) of the current fiscal year 2023, the current account deficit contracted by more than half to $3.1 billion against $7.2 billion in Jul-Nov 2021, with imports falling by $4.8 billion and exports broadly unchanged.
The significant drop in imports through administrative controls to manage the low foreign exchange reserves has badly impacted economic activities, he pointed out.
The PIAF Chairman said that the non-issuance of letters of credit (LCs) is crippling industrial activities, leading to massive unemployment as companies are unable to import the raw material necessary to keep their manufacturing wheel running.
While expressing deep concern over the non-issuance of LCs and a severe gas crisis, he stated that the emerging situation has terribly affected industrial activities as well as exports, which would have a devastating impact on the already ailing economy and the lives of millions of poor people due to massive layoffs.
How long an industrialist can bear the burden of paying salaries and wages to most of the idle employees if he is unable to produce at full capacity due to the unavailability of imported raw material and spare parts amid persistent gas shortage. He said that the reserves have depleted to a four-year low of $6.7 billion, raising the specter of default on international payments and foreign debt repayments.
He said that the current account deficit declined to a 19-month low in November 2022 and the primary reason was a 32% decline in imports in Nov compared to the same month of last year.
However, exports and remittances decreased by 13% and 14% respectively. He said that surprisingly the cumulative export earnings and workers’ remittances (at $4.35 billion) surpassed total imports ($4.26 billion) in November, which suggests the balance of payments has significantly improved in recent months, which is a must to mitigate the risk of default.
The government must let the dollar demand reflect in the inter-bank exchange rate. This method will reduce dollar hoarding in the kerb market, he added.
It is unfortunate that exports are falling due to the global recession while remittances are declining because the open market dollar rates are higher than the inter-bank rates that the businesses have to live with, he. It is essential that the government and opposition start a dialogue on the economic future of Pakistan.
They must not politicize the International Monetary Fund’s program, he suggested. Besides, it is necessary to deepen relations with the US, Saudi Arabia and China. The three countries can save us from debt default, he believed.
