Amid the deepening economic crisis in Pakistan, the business leaders of the country have warned that the country is heading toward social unrest and fear that it is becoming unsafe for foreign investment due to back-to-back government policies that seek to discourage investors.
“We don’t have continuity of economic policies. There have to be separate teams for economic matters and political issues so that policies remain intact; otherwise, it will keep affecting foreign and local investors,” said the former vice president of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), Saqib Fayaz Magoon, while reacting to the massive hike in the State Bank of Pakistan’s (SBP) policy rate from 7.5 per cent in September 2021 to 15pc in less than 10 months, the Dawn reported.
Secondly, he said, banks in Pakistan were reluctant (due to verbal instructions from the SBP) to make payments to businessmen who got supplies on collection base documents on short-term credit.
“The banks were making payments on LC-based payments alone. Pakistan witnesses around USD 1 billion in payments under credit-based business due to the credibility of Pakistani businessmen and foreign suppliers,” he said.
According to the Dawn, Magoon while expressing concern over the increasing value of the Dollar said that Foreign investors are looking with worry at this depreciation in the Pakistani rupee because they invest in dollars and get a return in local currency, as the exchange rate is likely to appreciate even further after Eidul Azha, he said.
Hyderabad Chamber of Commerce and Industry (HCCI) president Adeel Siddiqui reiterated Magoon’s statements while expressing concern over the falling crude oil prices and ghee. He was also worried about monetary policy, and poverty issues in the country.
“Don’t you remember the government has announced it will provide relief from lower fuel prices in the international market even if it drops by one dollar? Have you seen this relief being passed on to consumers?” he questioned.
On the contrary, he claimed that electricity and gas tariffs had been raised, in addition to a fuel price adjustment (FPA) of Rs 7.90 per unit, the Dawn reported.
Notably, Inflation in Pakistan increased to 21.32 per cent in the month of June, the highest in over 13 years, as per local media reports.
Pakistan’s Bureau of Statistics (PBS) stated that in May, the inflation rate as measured by the Consumer Price Index (CPI) was 13.76 per cent.
The inflation increased by 6.34 per cent month-on-month (MoM) and reached 21.32 per cent year-on-year (YoY) in June, the Dawn newspaper reported.
A double-digit inflation rate was witnessed in many sectors. The transportation sector recorded the highest inflation of 62.17 per cent and perishable food items, prices also increases by 36.34 per cent, it added.
Meanwhile, the education sector reported single-digit inflation of 9.46 per cent, and the communication sector reported inflation of 1.96 per cent, Dawn reported citing PBS.
Motor fuel, liquefied hydrocarbons and electricity charges recorded a 95 per cent increase in year-on-year inflation, as per the data.
The PBA had also expressed concern over the potential risks that might affect the growth aspects of the country even if they are expected to remain satisfactory.
It involves the trading partners of the country. In an attempt to counter inflation, the central banks of the country’s trading partners are increasing their interest rates which might cause the recession in these countries, the report said.