Dollar surge could stoke inflation: LCCI

RECORDER REPORT

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

LCCI President Irfan Qaiser Sheikh in a statement said 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.

He said the State Bank of Pakistan needed 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.

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

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

He 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.

He said the economy was already under tremendous pressure owing to multiple internal and external challenges it had been facing for the last many years.

He said that foreign direct investment (FDI) had collapsed while the domestic investment hit a 60 year low.

He said that an acute energy shortage and heavy government borrowing was mother of all economic ills.

He the government observed a little restraint; the economic situation would have been quite encouraging.

Irfan Qaiser Sheikh said that today almost all sectors of economy were showing negative growth and a further fall in value of rupee would cause more contraction in economic activities leading to a drastic cut in the tax revenue for government.

He said if the greenback continued its upward trend, it would 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.

The LCCI President suggested to the government to immediately review its energy plan, introduce institutional reforms and curtail non-development expenditures for the sake of country’s economy and its people. As, he said, no policy would work in the absence of electricity that was a major input for a large number of industries.