Sinking Pulse of Economy

With rising gas and electricity costs, industry is becoming less competitive and on verge of collapse

SUKKUR: Before coming to power, the present rulers had promised they would put the country’s economy on the right track. When Shabaz Sharif took over as the prime minister, he brought in economic experts to head the finance ministry. But there are no visible signed of improvement yet.

As things stand, the economy continues to suffer a decline amid a high US dollar rate, rising cost of electricity, a shift from Sui Gas to expensive liquified natural gas (LNG) and the continuing decline of industrial and trade sectors. Textile industry, which has been the country’s economic mainstay, is under threat of closure. Many industrialists are now planning to move their factories abroad. This is causing concerns among the working classes as well.

President of the Markazi Tanzeem-e-Tajran Pakistan, Kashif Chaudhry, recently visited Sindh province where he was greeted by president of Sukkur Small Traders’ Association, Javed Memon. He visited different markets – the cloth market, jewelry, Shahi Bazar, etc – and discussed the situation with the business community.

During these interactions, the business community told him that with the change of government in April, they were confident that the situation would improve because the Pakistan Muslim League Nawaz (PML-N) had been in power before and had economic expertise. But that has not happened, Kashif Chaudhry told Bol News.

He said he had also visited other major industrial and business hubs of the country such as Lahore, Karachi, Faisalabad, Gujarat and Gujranwala. Businessmen all over the country face the same problems; taxes are increasing, electricity is becoming more expensive and there is no gas.

Another problem is related to the continuing suspension of the Letters of Credit (LCs), he said. Both the former and present finance ministers of PML-N government, Miftah Ismail and Ishaq Dar, had promised that LCs worth 50,000 US dollars would be opened to restart the import process, but this has not happened. As a result, numerous containers packed with export goods are stranded at the Karachi port while neither the State Bank of Pakistan (SBP) nor the Federal Bureau of Revenue (FBR) have so far made any move to break the ice.

The rising input costs are rendering the Pakistani industrial products less competitive in the international market, he said. The most immediate competition comes from China, which has the potential to produce low-cost products and thus dominates most of the markets that are targeted by Pakistani traders.

The result is that many industries have started to close their operations, and the biggest losses are suffered by the textile sector. Pakistan is the fifth largest cotton producing country in the world, but it does not figure among the top ten textile producing countries of the world. By comparison, Bangladesh ranks 40th in terms of cotton production but ranks third in the list of textile production with an annual turnover of $39 billion.

Back in October 2022, the All Pakistan Textile Mills Association (APTMA) had in a letter written to then prime minister Imran Khan expressed its concerns over the approaching crisis, attributing it to electricity rates that were higher than elsewhere in the region. It also pointed out the severe financial crisis the industry was facing back then, with about Rs 250 billion stuck up at the FBR.

But no steps were taken to improve the situation, leading to the present crisis wherein at least around 400 of the country’s 1,200 textile mills have closed down, and many may follow in the coming weeks and months, he said. The same is the case with other industries, such as the steel industry, ceramics industry and others. Many of them are now considering moving their factories to countries abroad, such as Bangladesh and Malaysia, said Mr Chaudhry.

If the government wants to promote competitive industry and trade, it must cut down the cost of electricity, ensure natural gas supply, reopen the LC system and create conditions for the export of shipping containers stranded in Karachi, he said. If this doesn’t happen, he added, the country’s economy is likely to suffer a total collapse. This will not only cause large-scale unemployment, but also trigger high inflation, descending the country into a state of abject poverty.