KARACHI: President of the Pakistan Businesses Forum (PBF) Mian M Usman Zulfiqar has said that the value of dollar is once again rising against the rupee, which problem should be addressed now.
This abnormal volatility would create further chaos among the rank and file of the business community, he said.
He told media personnel that after revival of the IMF programme, strengthening of the local currency is necessary in order to adequately cope with the challenges of food security and rehabilitation of the flood affectees.
The markets had already factored in the IMF loan facility when the exchange rate improved by 10.7 percent to 213.90 to a dollar in interbank trade on Aug 16, from a historic low of nearly 240 towards the end of July. It might have remained at that level, even improved a bit, if the ‘brotherly’ Gulf countries had made good on their commitment to provide $4 billion in ‘safe deposits’.
However, the PBF chief expressed fears that the economy would slow down, and inflation and the current account deficit would rise as a result of the damages caused by floods. Similarly, the recent market anxiety was instigated by surging headline price inflation that spiked to its 47-year high of 27pc last month.
Now the country’s economic managers have a difficult task ahead as floods have wreaked havoc on the country's road and communication network, damaged an unimaginable number of houses, and wiped off millions of hectares of crops.
About the textile sector, Mr Zulfiqar said exports are almost stagnant. Fifty to 75 processing mills and about ten printing mills have been closed in the Faisalabad region. Similarly, 50,000 looms mills have been closed due to high price of electricity.
The PBF president said that factories in Punjab generally received electricity bills at Rs55 per unit, which is unbearable. From 300 to 350 embroidery machines have been closed so far.
He further said that Pakistan’s electricity and gas tariffs for the textile industry remain the highest in the region, rendering local firms uncompetitive even though the RCET tariffs are in play. The general industrial tariff remains at 0.15USD/ KWh, twice that of Vietnam and 1.5 times greater as compared to Bangladesh and India.
Likewise, Pakistan’s textile industry faces the highest gas/ LNG tariff in the region. Its textile industry is paying 9 USD/ MMBtu, which is 3.5 times more than Uzbekistan, and 1.5 times more than Bangladesh’s industrial tariff.
Our country’s textile industry must price its power inputs at a tariff lower than the regional average tariff of 0.072USD/ KWh, to stay regionally competitive. The current RCET for electricity (from the national grid) is higher than the regional average.
RCET is an imperative across the whole value chain, not just for the value-added/ exporting elements; if upstream units such as spinning firms cannot produce yarn at a competitive rate, processing firms would lose their market competitiveness even with lower energy tariffs.
The PBF head also said that more than 20 percent of Pakistan’s current cotton crop has been destroyed by severe rains and flooding, introducing a high level of uncertainty about the nation’s plans for export shipments.
“We are becoming a cotton-importing country, but importers are unaware of the International Cotton Association rules and their rights as buyers,” he added.
Copyright Business Recorder, 2022
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