Business experts warn of social unrest in Pakistan amid deepening economic crisis
Amid Pakistan’s worsening economic crisis, the country’s business leaders have warned that the country is heading for social unrest and fear it could become 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 must be separate teams for economic issues and political issues so that the policies remain intact, otherwise it will continue to affect foreign and local investors,” he said. 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 (SBP) policy rate by 7.5% in September 2021 to 15% in less than 10 months, reported Dawn.
He explained that industrialists and foreign investors always rely on interest rates and exchange rates before investing.
“If it changes so abruptly and quite dramatically, then foreign investors will start to evade Pakistan,” Magoon said as quoted by Dawn.
Second, he said, banks in Pakistan were reluctant (due to verbal instructions from the SBP) to make payments to businessmen who were stocking up on collection base documents on a credit to short term.
“Banks used to make payments solely on the basis of letters of credit payments. Pakistan records around $1 billion in payments under credit-based business due to the credibility of Pakistani businessmen and foreign suppliers,” he said.
According to Dawn, Magoon, while expressing concern over the rising value of the dollar, said that foreign investors are watching this depreciation of the Pakistani rupee with concern because they are investing in dollars and getting a return in local currency, because the exchange rate is probable. appreciate even more after Eidul Azha, he said.
Hyderabad Chamber of Commerce and Industry (HCCI) Chairman, Adeel Siddiqui reiterated Magoon’s statements while expressing concern over falling crude oil and ghee prices. He was also concerned about monetary policy and poverty issues in the country.
“Don’t you remember that the government announced that it would ease the drop in fuel prices in the international market even if it drops by one dollar? Have you seen this relief trickle down to consumers? he asked.
On the contrary, he claimed that electricity and gas tariffs had been increased, in addition to a fuel price adjustment (FPA) of Rs 7.90 per unit, Dawn reported.
Notably, inflation in Pakistan rose to 21.32 percent in June, the highest in more than 13 years, according to local media.
The Pakistan Bureau of Statistics (PBS) said that in May the inflation rate as measured by the Consumer Price Index (CPI) was 13.76%.
Inflation rose to 6.34% month-on-month (MoM) and reached 21.32% year-on-year (YoY) in June, the Dawn newspaper reported.
Double-digit inflation was observed in many sectors. The transport sector recorded the highest inflation of 62.17% and perishable goods prices also increased by 36.34%, he added.
Meanwhile, the education sector reported single-digit inflation of 9.46% and the communications sector reported inflation of 1.96%, Dawn reported quoting PBS.
Costs for fuel, liquefied hydrocarbons and electricity saw a 95% rise in inflation year-on-year, the data showed.
The PBA was also concerned about potential risks that could affect the growth aspects of the country even if they are expected to remain satisfactory.
It involves the country’s trading partners. In an attempt to counter inflation, the central banks of the country’s trading partners are raising their interest rates, which could trigger recession in those countries, according to the report.