SITE pres­i­dent crit­i­cizes de­val­u­a­tion of ru­pee

The Financial Daily - - NATIONAL -

KARACHI: Saleem Parekh, Pres­i­dent, SITE As­so­ci­a­tion of In­dus­try, Karachi, while com­ment­ing on the re­cent mas­sive ru­pee de­val­u­a­tion by the Govern­ment of Pak­istan, has said that in spite of the fact that we are in the freefall bas­ket of cur­ren­cies, yet the cur­rency is con­trolled by govern­ment through State Bank or di­rectly through Fi­nance Min­istry. If we are to act as per free-fall bas­ket of cur­rency, then we have to see that it has to fluc­tu­ate as and when the ru­pee ap­pre­ci­ates or de­pre­ci­ates. In this man­ner fash­ion, when we do a mas­sive de­val­u­a­tion of 8-9 ru­pees, it re­ally dis­turbs the en­tire sys­tem and the in­fla­tion goes just un­bounded and no strings can be at­tached to con­trol the in­fla­tion in the lo­cal mar­ket, says a Press re­lease.

He said that the in­dus­tries are af­fected in the most se­vere man­ner as the raw ma­te­ri­als sud­denly be­comes very ex­pen­sive. In­dus­tries have con­tracts of sales lo­cally and in­ter­na­tional for 6 months and some­times they are even of more than 6 months. So there is re­mote pos­si­bil­ity that one can get a price hike es­pe­cially in the in­ter­na­tional mar­ket where you are cov­ered un­der agree­ments with the buy- ers. To have this kind of a blow where the cost in­creases by 10 to 15 pc, is a night­mare for the man­u­fac­tur­ing sec­tor.

Due to high hopes of the in­dus­trial sec­tor es­pe­cially ex­porters to­wards the sym­pa­thetic ap­proach of the govern­ment to boost ex­ports, many ex­porters have al­ready booked lat­est tex­tile ma­chin­ery to take ad­van­tage of govern­ment's pos­i­tive pol­icy to­wards ex­ports but af­ter mas­sive de­val­u­a­tion, cost of ma­chin­ery will be un­bear­able and that will slow down the BMR process.

He fur­ther com­mented that even for the ex­port sec­tor, it would be a big set­back. Other than nat­u­ral cot­ton based com­modi­ties, all other com­modi­ties are 70 pc im­port-based. The im­ports would be­come ex­pen­sive. The in­put would be­come ex­pen­sive and the in­dus­try would again suf­fer and this 30 pc would not serve the pur­pose. On the other hand, hear­ing the news of de­pre­ci­a­tion of ru­pee and ap­pre­ci­a­tion of dol­lar, the buy­ers im­me­di­ately float the idea of re­duc­ing the price which ac­tu­ally hurts the in­dus­try most. If we look at the re­cent past, in the last 10 years, there have been mas­sive de­val­u­a­tion in last 4 years, made overnight. At one point in time, a cor­rec­tion was made. But at the most of the time, cor­rec­tions were never made.

He fur­ther com­mented that this is a big blow to the Pak­istan's econ­omy. The debt bur­den has in­creased by 900 bil­lion in ru­pee terms and the abil­ity to pay back debts has also ef­fected. When we are do­ing ev­ery­thing in ru­pee, the tax­a­tion would not serve the pur­pose and we would not be able to re­tire our debts. It is a vi­cious cir­cle. Then we need more money for which we need more taxes and in­crease in util­ity prices. So this will end up in lesser ex­ports. We would be higher in cost as com­pared to our re­gional com­peti­tors, es­pe­cially Bangladesh where ac­cord­ing to pre­vi­ous dol­lar par­ity, we were 40 pc more in gas price and al­most sim­i­lar in elec­tric­ity, min­i­mum wages and so many other things which ac­tu­ally played piv­otal role in terms of cost.

So how to run a fac­tory? How in­dus­try can be sus­tain­able? Can we sus­tain with this kind of in­sta­bil­ity in for­eign ex­change? he ques­tioned. Can we sus­tain this at­ti­tude of the govern­ment to tackle the is­sues and put the in­dus­tries in such ter­ri­ble po­si­tion.

He said that the gov­ern- ment should go for the con­sul­ta­tion with the in­dus­try & stake­hold­ers. On the one hand the govern­ment in­tends to nar­row down the trade deficit and on the other hand, it is cre­at­ing such kind of sit­u­a­tion whereby the mas­sive de­val­u­a­tion has been made. These are all to­gether two dif­fer­ent things and if the govern­ment thinks that by de­val­u­a­tion, they will be able to in­crease ex­ports, it is not like this. Spe­cially, in tex­tile sec­tor, the in­dus­tries which do lit­tle busi­ness in lo­cal mar­kets and more in ex­ports, their lo­cal sales will drop and ex­ports sales will suf­fer as buy­ers would think that sup­plier is get­ting 10 pc more and would ask for price re­duc­tion.

"We have started re­ceiv­ing such re­quests to re­duce price in the cur­rent or­ders and quote new prices. If case of no, they are not ready to buy from Pak­istan. To­day, the govern­ment should re­al­ize that com­modi­ties hav­ing logo 'Made in Pak­istan' are hard to sell in the world mar­kets. If we in­crease our cost, we will not be go­ing in the right di­rec­tion." He added.

He fur­ther said that con­sul­ta­tion is the key­word. Even if you build a road, you think about di­ver­sions

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