Auto industry lays off thousands as sales drop by 70%. The automotive industry has laid off thousands of workers in recent months due to a drop in sales of vehicles and spare parts due to the government’s ban on raw material imports, a sharp depreciation of the rupee and rising inflation, The News reported citing a report. Told while giving. Arab News reports.
Pakistan is facing its worst economic crisis to date, with the State Bank of Pakistan’s (SBP) foreign exchange reserves falling to $4 billion, barely enough to cover three weeks of imports. And the rupee has fallen to a historic low against the US dollar. ,
The country imposed restrictions on raw material imports last year to stem the outflow of US dollars, which has led to a sharp decline in industrial production and lead to layoffs and unemployment.
Amid the worsening dollar shortage, commercial banks also stopped opening letters of credit (LCs), leaving importers in the lurch to arrange greenbacks for orders already placed.
Meanwhile, inflation soared to over 36% in April, the highest in the country since 1964.
“We have laid off thousands of workers in recent months as our production has almost ground to a halt,” Munir Karim Bana, chairman of the Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM), told Arab News.
“There are no buyers now because auto makers have closed their plants.”
Bana said auto component manufacturers were paying late fees as raw material worth billions of rupees was stuck at the Karachi port.
PAAPAM supplies around 90% of local vehicle parts to the auto industry.
“We are paying interest on our loans from banks, our materials are getting devalued but there is no one to listen to our complaints,” said Bana.
He said that the means of income are drying up due to the closure of production units.
“We were profitable and paying taxes to the state because all of our sales are documented and tax has been paid,” he said. “But now we are bankrupt, and there is hardly any chance of revival of our industry in the coming years.”
Rana Ehsan Afzal, Prime Minister Shehbaz Sharif’s coordinator on commerce and industry, said the automobile industry “could not reach full efficiency until the revival of the IMF bailout program” because it was import-dependent and dollar-intensive.
A staff-level agreement on the ninth review of the IMF bailout deal signed in 2019 has been delayed since November.
“We have to protect our foreign exchange reserves at this stage by restricting the import of raw materials for the industry,” Afzal said.
Commenting on the drop in sales and massive layoffs, the PM’s coordinator called it “unfortunate”, while assuring that the government is “working round the clock to revive the economy.”
The officer said, “Each new day is better than the last.” “Even now we are ensuring minimum stability of the industry… This is a temporary phase wherein we have to stick to some import restrictions for the automotive industry, but when our reserves build up, we will see a boom in autos. industry again.
Abdul Waheed, a spokesman for the Pakistan Automotive Manufacturers Association, told Saudi Arabia that apart from auto parts sales, vehicle sales have also dropped by about 70% in a year, while some manufacturing plants have been closed for several months. media outlet.
“We have days of non-production as car manufacturing plants remain closed due to various reasons including inflation, lack of sales and ban on imports… Due to rupee devaluation vehicle prices have shot up and this has led to a huge reduction in demand has come,” he said. Said. Waheed said that despite the temporary closure of manufacturing plants, the companies are paying their employees.
“The future looks bleak in terms of job opportunities in the auto sector,” Waheed said.
“The current political and economic climate in Pakistan is not in favor of industrial production as rising inflation and rupee depreciation have broken the back of consumers,” he said.
