LCCI proposes three-pronged plan to strengthen economy

LAHORE: The Lahore Chamber of Commerce and Industry (LCCI) has suggested a three-pronged strategy for strengthening the economy, a statement said.

Referring to heavy fall in the KSE-100 Index, LCCI president Mian Nauman Kabir said that it was temporary and the investors should not worry and expressed the hope that the stock exchange would start recovery soon.

Kabir said that the stock market of any country was an important economic indicator, which shed over 2,134 points (nearly 4.7 per cent) in a day.

He said it was a single largest fall since March 2020 that would impact the global perception of Pakistan as a business-friendly economy.

The increase in trade deficit, hike in the policy rate and exorbitant increase in inflation have contributed significantly in the stock market decline, he said, adding that the issue of a steep rise in trade deficit needed urgent attention.

In the first five months of the current financial year (July-November 2021), the trade deficit stood at around $20.5 billion, which is 111 per cent higher, compared with the trade deficit in the same period last year.

This recent increase in trade deficit has played a part in the rupee depreciation. To control the trade deficit, he said, the government should curtail imports of non-essential and luxury items, implement a currency swap with China from where imports were more than $13 billion 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 and halal food. For enhancing our exports to untapped potential markets like Africa, Russia and Central Asia, the formal banking channels should be established on a priority basis,” he said.

The inflation rate for November stood at around 11.5 per cent. 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 the electricity tariff.

He urged the government to increase energy production through renewable sources to decrease reliance on imported oil.

“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,” he said.

The LCCI office-bearers said that the decision to increase the policy rate by150 basis points that has taken the policy rate to 8.75 per cent would have dire consequences on the economic growth rate. It would surely hinder the process of industrialisation and private sector growth, they said, adding that Pakistan should bring its interest rate at par with the regional rates, which were much lower (India 4 per cent, Bangladesh 4.75 per cent, China 3.85 per cent, and Sri Lanka 5 per cent.

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