LAHORE: Pakistan Association of Automotive Parts & Accessories Manufacturers (PAAPAM) Chairman Abdur Razzaq Gauhar has deeply regretted the State Bank’s move to increase the discount rate by 150 basis points.
He lamented that this move will multiply the current woes of the auto parts manufacturers, who are already facing a severe liquidity crunch owing to a three-fold hike in the cost of raw materials and sea freight.
Demanding the reversal of 1.5 percent increase in the interest rate, PAAPAM Chairman observed that this rise will lead to a crisis of unforeseen proportions for the industrial sector in general and the auto parts sector in particular.
The auto parts manufacturers are currently struggling to survive under the impacts of the rising cost of raw materials & freight, deterioration of rupee exchange rate, higher minimum wages, and expensive energy.
Several industrial units have already been forced to shut down their plants. The State Bank’s step may prove to be the last nail in the coffin, stated Razzaq Gauhar.
He also said that the governor of the central bank has negated the spirit of the PM’s initiative of promoting “Make in Pakistan” by raising the discount rate for the second consecutive time in Friday’s monetary policy statement. This increase in rate will reverse vital investments in the industrial sector and increase the defaulters’ list.
He said that the Pakistan automobile industry’s contribution to GDP is fairly substantial and it is providing employment/sustenance to over 4 million families. A very encouraging sign is that Pakistan parts have increased their share in the export market as well.
The Management Committee of PAAPAM requested that the interest rate should be brought back to 7 percent, to encourage industrial expansion and growth, which will bring in fresh investments and create jobs for millions of young people entering the job market every year. By this move, PAAPAM fears a downfall trend in the production of automobiles in near future adding another misery to the vending industry.
Abdur Razzaq Gauhar said that the interest rate should be nominal for the sake of expansion in investment activities and for creating jobs.
He said that the availability of cheaper money is absolutely necessary for bringing down the cost of production as it is like any other industrial input. If its price is raised, the cost of production also goes up.
Copyright Business Recorder, 2021