A majority of Pakistan’s largest businesses have stopped operations recently due to a lack of raw materials, foreign exchange, or both, adding to the woes of an economy seeking to avoid a debt default. According to a statement to the stock market on Friday, the local division of Suzuki Motor Corp. prolonged the closure of its manufacturing plant until February 21 due to ongoing part shortages. The tyre and tube manufacturer Ghandhara Tyre & Rubber Company closed its facility on February 13 due to “immense barriers towards importing raw materials and gaining clearance of consignments from commercial banks,” it was reported.
These are only two of a number of publicly traded enterprises, including manufacturers of fertilisers, steel, and textiles, who have closed their plants indefinitely or only occasionally resumed production due to a lack of inventory, cash, or even a decline in demand.
Foreign currency reserves
Due to its $3.19 billion in foreign currency reserves, Pakistan is unable to pay for imports, which leaves thousands of containers of supplies on its ports, suspends production, and risks jobs. Several things are becoming out of the grasp of the general population due to an inflation that is also at its highest rate in almost fifty years. Tahir Abbas, head of research and investment at Arif Habib Ltd, claims that these closures would have a negative impact on the country’s economic growth and raise unemployment rates to a level he has never seen among listed firms.
The multi-decade inflation has slowed down overall demand, as per Abbas. You see a typical demand destruction, then. In addition to this, we are employing administrative strategies to slow the economy.
Local companies of Suzuki Motor Corp., Honda Motor Co., and Toyota Motor Corp. also had lengthy factory closures. According to data from the Pakistan Automobile Manufacturers Association, this had a negative impact on Pakistan’s auto sales, which dropped by 65% in January to the lowest level in over three years. Engro Fertilizers Limited, Fauji Fertilizer Bin Qasim Limited, Nishat Chunian Limited, Amreli Steels Limited, Millat Tractors Limited, and Diamond Industries Limited are among of the businesses that have also stopped or scaled back operations. “The scenario this time has become quite grave as opposed to the crises we had experienced in 2018 or 2008,” said Abbas, who anticipates a slowdown in economic growth from 6% last fiscal year to a range of 1% to 1.25 this fiscal year, ending in June.