Pakistan economic crisis: According to Bloomberg, some major enterprises in the crisis-hit country have ceased operations due to a lack of raw materials or foreign exchange, compounding the difficulties of an economy attempting to avoid a debt default.
According to a stock market announcement issued on Friday, Suzuki Motor Corp.’s local affiliate has prolonged the suspension of its production facilities until February 21, citing ongoing component shortages.
Ghandhara Tyre & Rubber Company, which makes automotive tyres and tubes, closed its production on February 13 due to “immense hurdles towards importing raw materials and obtaining clearance of consignments from commercial banks.”
These are just two of a slew of publicly traded firms, including fertiliser, steel, and textile manufacturers, that have closed or ceased operations permanently due to a lack of inventory or cash or even a reduction in demand.
According to Tahir Abbas, head of research and investment at Arif Habib Ltd., these closures would have an influence on economic growth and raise unemployment in the country.
“The overall demand has tapered off because of the multi-decade inflation.” As a result, you see typical demand destruction.”Over and above this, we are taking administrative measures to slow down the economy,” Abbas said, as quoted by Bloomberg.
Local units of Honda Motor Co. and Toyota Motor Corp., like Suzuki, had weeks-long factory shutdowns. According to Pakistan Automobile Manufacturers Association data, car sales in Pakistan plunged 65% year on year in January, the lowest in nearly three years.
GSK Plc’s Pakistan unit, Engro Fertilizers Ltd., Fauji Fertilizer Bin Qasim Limited, Nishat Chunian Limited, Amreli Steels Limited, Millat Tractors Limited, and Diamond Industries Limited are among the companies that have closed or delayed operations.
According to Abbas, “the situation this time has become very critical as compared to the crises we saw in 2018 or 2008.” Economic growth would fall to 1%-1.25% this fiscal year ending in June, down from 6% last year.
In the midst of mounting economic problems, necessary products such as milk cost 250 per litre and poultry prices have risen to 780 per kilogramme in the country, while defence minister Khawaja Asif said that the government has already gone “bankrupt.”
According to Dawn, Pakistan’s external debt service increased by 70% in the first two quarters of 2022–2023, aggravating the country’s currency crisis. On the week ending February 10, the country’s central bank’s foreign exchange reserves increased by $276 million to $3.193 billion. The entire liquid foreign exchange reserves of the country were $8.702 billion.
The country is in a state of fear after the IMF delegation that arrived to discuss the specifics withdrew last week without reaching a final deal. Despite the fact that Finance Minister Ishaq Dar and Prime Minister Shehbaz Sharif agreed to all of the prerequisites Pakistan has now raised taxes and gasoline costs as well.