ISLAMABAD:
Due to the government’s ban on raw material imports, massive rupee depreciation, and rising inflation, the automotive industry has laid off thousands of workers in recent months.
Pakistan experiencing its worst economic crisis yet, with foreign exchange reserves held by the SBP plunging to $4 billion. It is just enough to cover three weeks of imports. The rupee plummeting to historic lows against the US dollar.
Last year, the country restricted raw material imports to prevent US currency outflow, resulting in a dramatic drop in industrial output and layoffs.
Commercial banks ceased opening letters of credit (LCs) as the currency constraint worsened, leaving importers unable to pay for orders.
April inflation reached 36%, the highest since 1964.
“We have retrenched thousands of workers in recent months as our production has virtually come to a halt,”. PAAPAM chairman Munir Karim Bana told Arab News.
Since automakers closed their plants, there is no customer.
Bana said auto parts firms incurring demurrage, a payment paid to the owner of a chartered ship for failing to load or discharge the ship within the agreed time, as raw supplies worth billions of rupees stranded at the Karachi port.
PAAPAM supplies 90% of auto industry local parts.
Bana stated, “We have paying interests on our loans from the banks. Our material is getting devalued but there is nobody to listen to our grievances.
He stated that production facilities closed, reducing profits.
“All our sales documented and tax paid,” he stated. However, we are bankrupt and our industry is unlikely to recover in the near future.
The vehicle sector is import-dependent and dollar-intensive, according to Rana Ihsan Afzal, Prime Minister Shehbaz Sharif’s commerce and industry coordinator.
Since November, a staff-level agreement on the ninth IMF bailout review agreed in 2019 has delayed.
We have to protect our foreign exchange reserves. It can only happen by keeping a watch on the import of industry raw material’, Afzal remarked.
The PM’s coordinator termed the sales drop and huge layoffs “unfortunate,” but said the administration was “working round the clock to revive the economy.”
“Every day better,” the official stated. “We’re still ensuring the industry’s minimal sustainability… When our reserves grow up, the auto industry will boom again.
Abdul Waheed, a spokeswoman for Pakistan Automotive Manufacturers Association, told the Saudi media source that auto parts and vehicle sales dropped by close to 70% in a year while certain manufacturing units have closed for months.
“We have non-production days as cars manufacturing plants remain shut due to inflation, decrease on sales and ban on imports…vehicle prices have shot up due to rapid rupee devaluation and this led to a significant reduction in demand,” he stated. Despite manufacturing plant closures, Waheed said companies paid their employees.
Waheed said car industry job prospects are gloomy.
“The current political and economic environment in Pakistan doesn’t favour industrial production as consumers’ backbone has broken with soaring inflation and rupee devaluation,” he added.
