Blocked imports deepen unemployment fears in crisis-hit Pakistan

Industry warns of rising unemployment due to blocked imports. (Representative)

Islamabad, Pakistan:

Pakistan’s business chiefs are clamoring for the cash-strapped government to allow construction materials stuck at the country’s major port of Karachi, warning that failure to lift restrictions on imports will leave millions jobless.

Facing critically low US-dollar reserves, the government has banned imports of all essential food and medicines until a lifeline bailout is agreed with the International Monetary Fund (IMF).

Industries such as steel, textiles and pharmaceuticals are barely functioning, forcing the closure of thousands of factories and deepening unemployment.

The steel industry has warned of serious supply-chain issues due to a shortage of scrap metal, which is melted down and turned into steel bars. The bars have reached record prices in the past few weeks.

“We feed material directly to the construction industry, which is linked to about 45 downstream industries,” said Wajid Bukhari, head of the Large Scale Steel Producers Association of Pakistan.

“It’s going to be a full circle jam.”

Smaller factories have already closed after running out of stock, while some of the bigger plants are just days away from closing, he said.

With an import bill of around $150 million a month, the steel industry says its operations directly and indirectly affect several million jobs.

The latest data from the central bank said foreign exchange reserves had shrunk to just $2.9 billion – enough for less than three weeks of imports.

The Pakistan Constructors’ Association said, “The situation gives rise to fears that the construction industry will shut down very soon, plunging thousands of laborers into unemployment.”

‘grinding halt’

Years of financial mismanagement and political instability have plagued Pakistan’s economy – made worse by the global energy crisis and devastating floods that submerged a third of the country.

Raw material shortage as well as rising inflation, rising fuel cost and falling rupee have battered manufacturing industries.

An IMF delegation left Pakistan on Friday after urgent talks to restart the stalled loan programme, sparking uncertainty for business leaders.

The textile and apparel industry is responsible for about 60 percent of Pakistan’s exports and employs approximately 35 million people, processing items such as towels, underwear, and linen for major brands around the world.

“Priority should be given to the textile industry,” said Shahid Sattar, general secretary of the All Pakistan Textiles Association.

“We are the mainstay of the country’s exports,” he told AFP.

“If you don’t have exports, how will you increase your foreign exchange reserves? As a result, how will the economy recover?”

The region has been importing large quantities of raw fabric after floods destroyed the domestic cotton crop last summer.

Factory owners last month appealed to the finance minister for “direct intervention” to clear the backlog, which also affects dies, buttons and zippers.

Sattar said, “The textile industry in Pakistan is more or less at a standstill. We don’t have raw material to run our mills.”

About 30 percent of textile mills have completely stopped operations, while the rest are operating at less than 40 percent capacity.

Tauqeer-ul-Haq, head of the Pakistan Pharmaceutical Manufacturers’ Association, said that 40 pharmaceutical factories were on the verge of closure due to lack of critical ingredients.

poverty alleviation

Pakistani economist Kaisar Bengali said the supply-chain crisis was “feeding into inflation and also affecting the government’s revenue”.

It is also increasing unemployment and fueling poverty, a large portion of construction and factory workers in Pakistan are paid daily wages.

“On an average, during regular production, workers are paid for around 25 days (per month), but now they are getting wages for 10 to 15 days. While some companies have suspended their production and The workers will be paid only after construction begins,” Bengali told AFP.

Nasir Iqbal, an economist at the Pakistan Institute of Development Economics, said currently the ban on exports “can never be a permanent solution”.

Finance minister Ishaq Dar, who is under pressure, said last week that businesses should “let money come in from the IMF” before letters of credit can resume for imports to end the impasse.

Meeting the conditions of the bailout, such as raising the cost of petrol and energy, is also expected to increase inflation, but should pave the way for further financial aid from the Allies.

In the old Silk Road city of Peshawar, factories making everything from glass to rubber and chemicals have shut down over the past several months, mostly for the neighboring Afghan market.

Malik Imran Ishaq, chairman of the Industrialists Association Peshawar, said, “Around 600 have closed, while many are operating at half capacity.”

“The entire business community is in serious trouble.”

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

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