LCCI calls on government to take action to control inflation and stabilize rupee
LAHORE: The Lahore Chamber of Commerce and Industry (LCCI) has stressed the need to take measures to control inflation and stabilize the exchange rate to bring some relief to the business community.
LCCI President Mian Nauman Kabir, who was leading a delegation, made various suggestions to President Dr Arif Alvi to resolve the problems faced by trade and industry.
LCCI senior vice president Mian Rehman Aziz Chan, vice president Haris Ateeq and members of the executive committee were part of the delegation.
Dr Arif Alvi said the government is committed to providing a competitive and fair business environment for entrepreneurs and has taken a number of steps in this regard.
Despite limited resources, the government has provided maximum relief to business and vulnerable segments of society during the Covid-19 pandemic, he said and urged the LCCI to play its role in encouraging men business to pay taxes in order to reduce the budget deficit. and the allocation of additional funds for development work.
Kabir said the depreciation of the rupee led to a skyrocketing increase in production costs. He suggested reducing imports of non-essential and luxury items and interventions by the State Bank of Pakistan (SBP) to control the exchange rate.
The government should work on a currency exchange with China and focus on a concrete strategy of import substitution and improvement of exports, he said, adding that the issue of rising inflation required the government attention.
The inflation rate for the month of October was over 9 percent. The persistent rise in inflation has increased the cost of doing business / production. The main causes of inflation were the depreciation of the exchange rate, the increase in world crude oil prices, the overdependence on imported commodities / raw materials / machinery / oil and the increase in tariffs. electricity.
Kabir also suggested increasing energy production from renewable sources to reduce reliance on imported oil. Increased use of public transport through an appropriate policy framework would also help reduce oil imports.
At the same time, provincial governments should strengthen their pricing mechanism to control food inflation. Strict and indiscriminate action should be taken against all those involved in illegal profits and hoarding, he added.
The LCCI president said the issue of a sharp increase in the trade deficit required urgent attention from the government. In the first four months of the current fiscal year (July-October 2021), the trade deficit stood at over $ 15 billion, 105% higher than the trade deficit for the same time of the year last. This recent increase in the trade deficit has played a role in the depreciation of the rupee.
Pakistan’s exports were heavily concentrated in a few product lines, with textiles, rice and leather accounting for nearly 70 percent of exports.
He suggested diversifying exports, particularly focusing on potential sectors such as pharmaceuticals, engineering and halal foods. These potential sectors should be totally zero-rated to increase the competitiveness of exports, he said, adding that collective actions are necessary to explore new export markets, as around 65% of Pakistani exports are intended for only 10 countries.
To increase exports to untapped potential markets such as Africa, Russia and Central Asia, formal banking channels should be established as a matter of priority, the LCCI chief said.
Pakistan has long neglected regional trade. According to statistics from the State Bank of Pakistan, exports to South Asia and Central Asia (Afghanistan, Bangladesh, India, Iran, Sri Lanka) amounted to $ 1.99 billion in 2020 / 21, which represented only about 8% of total exports. There should be a separate policy to promote regional trade, he added.
Kabir said the decision to raise the policy rate by 150 basis points would negatively affect the rate of economic growth. This would hamper the industrialization process and the growth of the private sector, he said, adding that Pakistan should bring interest rates to the same level as regional rates (India 4%; Bangladesh 4.75%; China 3.85%; and Sri Lanka 5% cent).
The Federal Board of Revenue (FBR) has allowed its agents to forcibly collect taxes from taxpayer bank accounts without seeking approval from the president and advice from the CEO / owner of the company.
Actions such as bank foreclosure would be a major obstacle to creating a good business atmosphere, he said, adding that such discretionary powers should be removed.
He also said that credit available to the private sector was only 17 percent of GDP, the lowest in the region. Small and medium-sized enterprises (SMEs) get only 6 percent of private sector credit, while the number of SME borrowers was around 163,000.
In the recently approved SME policy 2021, the government provided for the provision of unsecured loans of up to Rs 10 million, he said and expressed hope that the government would ensure the implementation of this initiative.
The government has reduced import duties on many commodities over the past two years and also in this budget.
“We hope that this process will continue and that all raw materials not manufactured locally will be declared zero-rated thanks to the removal of regulatory and customs duties,” he said.