Auto sector not to blame for rising current account deficit: IMC CEO

Indus Motor Company CEO Ali Asghar Jamali said on Wednesday that food and petroleum imports, which cumulatively amounted to $27 billion in fiscal year 2021-23, are the biggest contributors to the current account deficit of Pakistan.

Speaking to reporters, he argued that the auto sector was not to blame for the surge in import bill.

“Despite highest ever sales last year (at 320,000 vehicles), auto sector added only $2.25 billion to the import bill,” Jamali said.

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“A drop in sales and production will not only deal a blow to the industry but also hit government’s revenue,” he said adding that the government could lose $1.5 billion in taxes.

“We understand that the government needs to take harsh measures to revive the economy but restrictions on import of completely-knocked down (CKD) units will not help counter current account deficit because auto sector contributes mere 3% to the import bill,” he added.

He also noted that import restrictions were affecting local vendors of Pakistan and threatening the livelihoods of more than three million labourers who are associated to the auto sector.

Jamali confirmed that IMC did not lay off any employee despite reduction in production to just 40% of the total capacity due to restrictions on CKD imports. He also feared that demand of vehicles was expected to halve due to the devastating floods which have impacted 33 million people.

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“All imports are not of the same nature therefore, the authorities need to categorise them,” he stressed. “The government can restrict import of luxury goods while shipments of auto parts for local production should be allowed.”

The auto sector is termed mother of all industries as it has a multiplier effect of 10, Jamali said.

Moreover, a single job created by an original equipment manufacturer (OEM) can create 10 jobs in the allied sector.

Local part manufacturers and localisation-based industries are the biggest victims of import restrictions as IMC alone procures local parts worth over Rs270 million every day, he said.

Due to the measures taken by the government, numerous vendors are laying off employees, the IMC CEO said.

He highlighted that due to import and LC restrictions, almost all automakers of the country had to observe plant shutdowns for extended periods which has badly affected their productivity and revenue.

“The shutdowns are resulting in unemployment, loss of welfare to workers and many other issues,” he said.

Sharing his company’s plans, he stated that IMC announced to invest $100 million for local production of hybrids and locally manufactured Corolla Cross will be available in the market by next year (2023).

Local production of hybrids will also open doors for technology transfer, GDP increase, employment generation and exports, he opined.