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LAHORE: The Lahore Chamber of Commerce & Industry on Saturday urged the State Bank of Pakistan to make appropriate market interventions to stop the dollar flight as it is adversely impacting a number of important sectors of our economy.

In a statement, President of the Lahore Chamber of Commerce & Industry Mian Nauman Kabir, Senior Vice President Mian Rehman Aziz Chan and Vice President Haris Ateeq said that Pak-rupee fall has far-reaching implications including increasing the cost of production and inflationary pressure.

They said that the local industry is dependent on imported raw materials, components and machinery; and devaluation of local currency against the US dollar will definitely increase the cost of doing business. “It is also one of the major causes of oil shocks”, they said adding that because of high cost, it would be difficult for the Pakistani merchandise to compete with the competitors in the international market. “Pak –rupee has been on a downward trend for over four months and the currency has lost over Seven percent since the start of July of this year”, they said.

The LCCI office-bearers said that State Bank of Pakistan should take appropriate measures to stabilize Pak-rupee against the US dollar otherwise it will result in an economic slowdown besides scaring off the international investors.

The LCCI office bearers expressed their concern on the rising trade deficit which is the root cause of devaluation. The trade deficit in the first two months of current financial year (July-August 2021) stood at 7.5 billion dollars, exhibiting an increase of 122% as compared to the same period last year. The LCCI office bearers stressed on the need of import substitution; and expansion of manufacturing base in the country to enhance the competitiveness of industry and curtail the trade deficit. They said that the devaluation will lead to lower industrial productivity, surge debts, inflation hike and will reduce the purchasing power of the masses. They said that surge in dollar price will increase the import bill as all imported oil, raw materials and other essentials will go high.

They said that recent surge in the prices of the greenback will not only jack-up the cost of doing business but would also squeeze the profit margins of private sector. They said that the State Bank of Pakistan needs to ascertain the factors weakening the value of rupee and check the possibilities of undue speculations and malpractices in the operation of foreign exchange markets in Pakistan. This will help stabilize rupee and restore the confidence of the business community.

They said that the government should take immediate measures to arrest further devaluation of rupee to avoid more damaging consequences for the economy. They said though the weaker rupee benefits the exporters by giving them more rupees per dollar, but this benefit is neutralized by the costly imported inputs of manufacturing sector including textiles thus eroding the financial advantage of a weaker rupee.

The LCCI office-bearers said that if the greenback continues its upward trend, it will certainly inflate import bill besides lowering the competitiveness of Pakistan’s business and industry. Therefore, government should get quickly into action to arrest this dangerous trend. They suggested to the government to immediately introduce institutional reforms and curtail non-development expenditures for the sake of country’s economy and its people.

Copyright Business Recorder, 2021

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