A number of Pakistan’s largest businesses have stopped operations recently due to a lack of raw materials, foreign currency, or both, adding to the woes of an economy trying to avoid a debt default.
According to a statement to the stock exchange on Friday, the local division of Suzuki Motor Corp. prolonged the closure of its manufacturing plant until Feb. 21 since there are still parts shortages.
Tire and tube manufacturer Ghandhara Tyre & Rubber Company shut down on February 13 due to “immense difficulties” with importing raw materials and getting commercial banks to clear consignments, according to the company.
These are only two of a number of publicly traded enterprises, including producers of fertilizers, steel, and textiles, who have closed their plants permanently or only occasionally resumed production due to a lack of inventory, cash, or even a decline in demand.
Due to its $3.19 billion in foreign exchange reserves, Pakistan is unable to pay for imports, which leaves thousands of containers of supplies on its ports, halts production, and threatens jobs. Several things are becoming out of the grasp of the general public due to an inflation that is also at its fastest rate in nearly fifty years.
Tahir Abbas, head of research and investment at Arif Habib Ltd, claims that these closures will have an adverse effect on the nation’s economic growth and raise unemployment rates to a level he has never seen among listed companies.
The multi-decade inflation has slowed down overall demand, according to Abbas. You observe a typical demand destruction, then. In addition to this, we are employing administrative strategies to slow the economy.
Local subsidiaries of Honda Motor Co. and Toyota Motor Corp. also had lengthy factory closures. According to data from the Pakistan Automobile Manufacturers Association, this affected Pakistan’s car sales, which dropped 65% to the lowest level in over three years in January compared to the same month last year.
Engro Fertilizers Limited, Fauji Fertilizer Bin Qasim Limited, Nishat Chunian Limited, Amreli Steels Limited, Millat Tractors Limited, and Diamond Industries Limited are some of the businesses that have also stopped or scaled back operations.
According to Abbas, who anticipates a slowdown in economic growth to a range of 1%-1.25% this fiscal year ending in June from a year earlier, “the scenario this time has become quite critical as opposed to the crises we had seen in 2018 or 2008.”