Skyrocketing value of dollar, detention charges to hit importers’ plans badly: LCCI

LAHORE: President of the Lahore Chamber of Commerce and Industry (LCCI) Mian Nauman Kabir has feared that speedy dollar flight and demurrage, detention charges on the importers will hit the business plans badly.

While talking to a group of businessmen, Mian Nauman Kabir said that the government and the State Bank of Pakistan should arrest the dollar flight through short-term and long-term measures otherwise it will reignite high inflation and halt growth by hitting all the important sectors of economy.

He said that the government should not only arrest the dollar flight but should also urged the shipping companies to wave-off the detention charges of the containers that were stuck on the ports because of ban on the luxury goods.

Mian Nauman Kabir said that it was very encouraging that the government accepted the LCCI demand and released the consignments stuck at ports and airports and granted one-time special permission to release the consignments to salvage the importers whose consignments of luxury goods which were landed on or before June 30, 2022.

He said that the day-by-day jumps in dollar value against Pak-rupee will jack-up the cost of doing business. He said that the State Bank of Pakistan needs to ascertain the factors that are weakening the value of rupee and check the possibilities of undue speculations and malpractices in the operation of foreign exchange markets in Pakistan. This will help stabilize rupee and restore the confidence of the business community.

Mian Nauman Kabir said that the main cause of the devaluation in recent times has been the political uncertainty. Since our Industry heavily relies on imports of raw materials, components and machinery, this devaluation has resulted in an increase in the cost of production. The Government should take all possible measures to strengthen the local currency. He said that there is a dire need to be a renewed focus on import substitution and enhancing exports besides creating an environment of political stability.

The LCCI President said that an unchecked increase in the dollar rates is multiplying the cost of doing business and badly affecting the industrial, manufacturing and agriculture sectors as Pakistan has to import oil, fertilizers, food items, machinery and industrial raw material.

He said that the government should take immediate measures to revert the trend of devaluation of rupee to avoid more damaging consequences for the economy.

Mian Nauman Kabir said that though the weaker rupee benefits the exporters by giving them more rupees per dollar, but this benefit is neutralized by the costly imported inputs of manufacturing sector including thus eroding the financial advantage of a weaker rupee.

He said that the economy is already under tremendous pressure owing to multiple internal and external challenges it has been facing for the last many years.

The LCCI President added that a further fall in value of rupee will cause more contraction in economic activities leading to a drastic cut in the tax revenue for the government.

He said that if the greenback continues its upward trend, it will certainly inflate import bill besides lowering the competitiveness of Pakistan’s business and industry.

Therefore, the government should get quickly into action to arrest this dangerous trend.

He also suggested to the government to immediately review its energy plans, introduce institutional reforms and curtail non-development expenditures for the sake of country’s economy and its people.

Mean while, perturbed with the ongoing political uncertainties followed by unprecedented depreciation of rupee against dollar, the Pakistan Industrial and Traders Associations Front (PIAF) Chairman Faheem Ur Rehman Saigol urged the treasury and opposition to resolve the issues through talks as unrest creating unstable economic conditions, calling for controlling instability of rupee against the US dollar, as the industrial expansion and economic growth is not possible without stable local currency.

Faheem Ur Rehman Saigol, in a joint statement along with Senior Vice Chairman Haroon Shafique Chaudhary and Vice Chairman Raja Adeel Ashfaq, observed that local currency continued to take a massive hammering at the hands of the US dollar in the inter-bank market, hitting 224 in intra-day trading amid renewed political uncertainty that has wrecked market confidence.

He said that a steep fall in the value of Pakistani rupee against foreign currencies have been causing an addition of trillions of rupees to the public debt, besides high inflation.

He said that the rupee was being quoted at 224 during the day, a massive depreciation of Rs8.8 or nearly 4% against the greenback.

Faheem Ur Rehman Saigol feared that political climate of the country has become unpredictable due to political uncertainty, reducing the level of investment and affecting the economic growth of the country, suggesting the government as well as the opposition parties to settle issues through talks, which is the right way to resolve the issues.

He appealed the political leadership to act wisely and show commitment with the country, as the lack of political stability is ruining the trade and economic activities in the country.

Quoting the international rating agencies reports, he observed that heavy import payments and renewed political uncertainty are reasons behind the massive fall of rupee. Additionally, Fitch Ratings’ downgrade of Pakistan’s outlook has also added to the pressure.

He said that compounding uncertainty is the downgrade of Pakistan’s outlook by Moody’s last month and Fitch on Tuesday, as the Fitch Ratings agency downgraded Pakistan’s outlook from stable to negative in view of the significant deterioration in the country’s external liquidity position and financing conditions since early 2022.

Fitch saw considerable risks to the implementation of the IMF programme and to continued access of Pakistan to financing after the programme’s expiry in June 2023 in a tough economic and political climate. He added that despite the recovery in remittances, things are not looking good with regards to the political climate, he said.

Moreover, he observed that dollar continued to appreciate against the rupee also because of the higher current account deficit and burgeoning import bills. Besides increasing exports and controlling imports the government will have to take administrative measures.

The PIAF Chairman said that this situation might create unstable economic conditions, generating higher risks, and transforms into low investment while inflation is one of the key sources of uncertainty. The high rate of inflation leaves the nation uncertain about potential investments, he added.

He said that the country is facing a huge economic loss only because of wrong statements and irrational attitude of political players. He said that a week of stalled economic activity costs the country around $500 million and $2 billion per month and poor economy like Pakistan cannot afford even one million dollar loss to exports. He said that at a time when country is facing severe internal and external challenges, the situation is bound to affect the national interests.

Copyright Business Recorder, 2022