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LAHORE: The Lahore Chamber of Commerce & Industry (LCCI) on Friday suggested a three-pronged strategy to further strengthen economy.

In his reaction over recent heavy fall in PSX Index, LCCI President Mian Nauman Kabir said that the slump is temporary so the investors should not be panic and he hoped that it will start its revival process soon.

In a statement, LCCI President Mian Nauman Kabir, Senior Vice President Rehman Aziz Chan and Vice President Haris Ateeq said that stock market of any country is an important economic indicator which shed over 2134 points (nearly 4.7%) in a day. They said that it is a single largest fall since March 2020 that will impact the global perception of Pakistan as a business friendly economy.

They said that the increase in trade deficit, hike in policy rate and exorbitant increase in inflation have contributed significantly in the fall of stock market.

The LCCI office-bearer said that the issue of a steep rise in trade deficit needs urgent attention of the government. In the first five months of the current financial year (July-November 2021), the trade deficit stood at around US 20.5 billion dollars - that is 111% higher as compared to the trade deficit in the same period last year. This recent increase in trade deficit has played a strong part in the devaluation of rupee.

They recommended that to control the trade deficit, government should curtail imports of non-essential and luxury items, implement a currency swap with China from where our imports are more than 13 billion dollars and focus on a concrete strategy of import substitution and enhancing exports. There is a need to diversify our exports, especially focusing on potential sectors like Pharmaceuticals, Engineering Industry and Halal Food etc. For enhancing our exports to untapped potential markets like Africa, Russia and Central Asia etc, the formal Banking Channels should be established on priority basis.

The LCCI office-bearers said that the inflation rate for the month of November stood at around 11.5%. The main reasons for the increase in inflation are exchange rate depreciation, increase in global crude oil price, over reliance on imported commodities/raw materials/machinery/Oil and the increase in electricity tariff. LCCI recommends that to control inflation, the government should increase the energy production through renewable sources to decrease reliance on imported Oil. The price control mechanism needs to be strengthened to control food inflation. Strict and indiscriminate actions should be taken against all those involved in illegal profiteering and hoarding.

They were of the view that the decision to increase the policy rate by 150 basis points that has taken the policy rate to 8.75% which would have dire consequences on economic growth rate. It will surely hinder the process of Industrialization and private sector growth. Pakistan should bring its interest rate at par with the regional rates which are much lower (India 4%, Bangladesh 4.75%, China 3.85%, and Sri Lanka 5%).

Copyright Business Recorder, 2021

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