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LAHORE: The Lahore Chamber of Commerce and Industry (LCCI) on Friday feared that the dollar surge could reignite high inflation and halt growth by hitting all the important sectors of the economy.

In a statement issued here, the LCCI President Mian Nauman Kabir, Senior Vice President Mian Rehman Aziz Chan and Vice President Haris Ateeq said that the recent surge in the prices of the greenback would not only jack up the input cost but it would also erode the profit margins.

The LCCI office-bearers 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 the rupee and restore the confidence of the business community.

“Exorbitant Depreciation of more than 20% has taken place in the last one year. The inter-bank dollar rate on April 21, 2022 stood at Rs186.96 as compared to Rs153.23 on April 21, 2021. In the last two months, a devaluation of more than 6% has taken place”, they said, adding that the main cause of the devaluation in recent times has been the political uncertainty.

Since our Industry heavily relies on imports of raw materials, components and machinery, this devaluation has resulted in an increase in the cost of production. The new Government should take all possible measures to strengthen the local currency.

They said that there needs to be a renewed focus on import substitution and enhancing exports besides creating an environment of political stability. The imports of non-essential and luxury items should be curtailed.

They said that an unchecked increase in the dollar rates is multiplying the cost of doing business and badly affecting the industrial, manufacturing and agriculture sectors as Pakistan has to import oil, fertilizers, food items, machinery and industrial raw material.

They said that the government should take immediate measures to arrest further devaluation of the rupee to avoid more damaging consequences for the economy.

The LCCI office-bearers 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 the manufacturing sector including textiles thus eroding the financial advantage of a weaker rupee.

They said that the economy is already under tremendous pressure owing to multiple internal and external challenges it has been facing for the last many years.

They added that today almost all sectors of the economy are portraying a gloomy picture and a further fall in value of rupee will cause more contraction in economic activities leading to a drastic cut in the tax revenue for the government.

They added 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, the government should get quickly into action to arrest this dangerous trend.

The LCCI office-bearers also suggested to the government to immediately review its energy plans, introduce institutional reforms and curtail non-development expenditures for the sake of the country’s economy and its people.

Copyright Business Recorder, 2022

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