Over the last few months, various major Pakistani companies have ceased their operations due to raw materials and currency shortages, adding to the challenges faced by the struggling economy of the country.
Bloomberg reported that Suzuki Motor Corp.’s local unit extended the closure of its manufacturing plant until February 2, citing a constant shortage of parts. Ghandhara Tyre & Rubber Company, a tyre and tube manufacturer, closed its facility on February 13 due to significant obstacles in importing raw materials and getting clearance for consignments from commercial banks.
These are just two examples of many publicly traded companies, including fertiliser, steel, and textile producers, that have shut down their plants permanently or suspended production due to inventory shortages, lack of cash, or even declining demand.
Pakistan’s foreign exchange reserves, which total $3.19 billion, make it impossible for the country to pay for imports, leaving thousands of supply containers stranded at its ports, halting production, and jeopardizing jobs. The fastest inflation rate in nearly half a century is causing several things to become out of reach for the general public.
Several large companies in Pakistan have recently shut down or suspended operations due to shortages of raw materials and currency, exacerbating the economic challenges faced by the country. The closure of such businesses is expected to result in reduced economic growth and increased unemployment levels.
Tahir Abbas, head of research and investment at Arif Habib Limited, stated that he has never seen such an extensive series of closures among listed companies before. Among the affected companies are major car manufacturers, such as Suzuki Motor Corp. and Toyota, as well as various producers of fertilizers, steel, and textiles.
Even multinationals have closed down their mobile manufacturing units in Pakistan due to a shortage of dollars. As a result, the prices of essential goods are increasing, and citizens’ basic needs are becoming difficult to meet.
Over the past few months, more than three dozen pharmaceutical companies have notified Pakistan’s Drug Regulatory Authority that they will halt production due to raw material unavailability and have asked for a price increase.
Pakistan’s economy has been unstable for a long time, and the country is now facing a severe financial crisis. The World Bank report released in October 2022 highlighted the country’s slow economic growth and volatile human development outcomes.
How Pakistan can resolve its economic crisis?
There is no one-size-fits-all solution to resolving Pakistan’s economic crisis, as it is a complex issue with multiple factors at play.
However, here are some potential steps that the country could take to address the issue, for example Pakistan could undertake reforms to improve the functioning of its institutions, such as by making the tax system more efficient, improving the legal system, and reducing red tape.
Similarly Pakistan could take steps to make itself more attractive to foreign investors, such as by improving infrastructure, providing incentives to investors, and simplifying regulations.
