Debt-laden Pakistan’s decision to curb trade deficit by restricting imports is impacting not only its economy, but also rapidly morphing it into a bigger crisis of rising unemployment.
According to noted economist Hafiz A Pasha, the number of unemployed people in the country will rise by over 2 to 8 million by the end of 2022-23. Citing the labour force consisting of 75.3 million people, Pasha opined the unemployment rate will approach 10 percent ‘probably for the first time’.
Though the country’s official data on unemployment looks sketchy at best on the issue, however, by taking the listed companies as a proxy for what’s happening in the rest of the economy, the trend becomes crystal clear.
“An increasing number of businesses are either scaling back operations or shutting down production mainly for one reason: the unavailability of imported raw materials. Dozens of companies have issued notices of production halts in recent months. Curbing imports of raw materials to improve the trade balance is tantamount to cutting one’s nose to spite one’s face,” The Dawn newspaper reported.
Since the beginning of 2023, all production units of Dawlance, a private company with Turkish sponsors, have remained stayed. The firm says it started facing import-related problems back in May 2022.
As per the daily’s report, the State Bank of Pakistan in August 2022, allowed the firm to make do with a quota of 38 percent of its preceding year’s imports, however, with bureaucrats and bankers began playing a ‘pick-and-choose’ game with import orders, and situation became worse.
Details pouring say increasing number of businesses are either scaling back operations or shutting down production mainly for one reason — the unavailability of imported raw materials
Among other sectors affected include those involved in shortage of X-ray films in the country. Even a soap maker said that his factory had been closed for months and the banks were not clearing his letter of credit for oil that was used as a natural perfume in very small quantities.
Total liquid foreign reserves:
Earlier on Thursday, SBP said that the total liquid foreign reserves held by the country stood at US$ 9.85 billion as of March 10, 2023, out of which US$ 4.3 billion belong to net reserves with SBP and US$ 5.5 billion belong to net reserves with banks.