Pakistan's attempts to reduce its trade imbalance have resulted in a situation of growing unemployment
According to a research, Pakistan's attempt to reduce its trade imbalance by limiting imports is quickly developing into a larger dilemma of growing unemployment.
The official statistics on unemployment is at best hazy on the subject, but when the listed firms are used as a proxy for the state of the rest of the economy, the pattern is unmistakable.
"A growing number of companies are either cutting down on operations or stopping production, mostly due to the scarcity of imported raw materials. In recent months, dozens of businesses have announced production halts. Cutting one's nose off to spite one's face is equivalent to limiting imports of raw materials, according to an article in the Dawn daily.
From the beginning of 2023, Dawlance, a private firm with Turkish backers, has maintained a closed manufacturing line. Import-related issues first surfaced for the firm in May 2022.
In August of last year, the central bank gave it permission to get by with a quota of 38 percent of its imports from the year before. Yet the CEO of the firm told me in an interview that things became worse when bankers and bureaucrats started selecting which import orders to approve.
There are hundreds of parts in refrigerators and refrigerators. If even the tiniest component is missing, a product cannot be supplied, he stated. The whole manufacturing line thus quickly came to a stop.
Allowing the salary-drawing bureaucrats to decide which companies succeed and fail even resulted in a scarcity of X-ray films throughout the nation.
According to the story, a soap manufacturer claimed that his plant had been shut down for months during a Karachi Chamber of Commerce and Industry (KCCI) town-hall meeting. He said that banks weren't paying him his letter of credit for oil that was used in very tiny amounts as a natural scent. The central bank governor was humiliated at the same KCCI event because merchants abused him for enforcing arbitrary import restrictions, leaving him with a crimson face.
By the end of 2022–2023, more than 2–8 million more people would be jobless, predicts eminent economist Hafiz A. Pasha. He predicted that the jobless rate would surpass 10% "possibly for the first time," given that there are 75.3 million individuals in the labour market.
The impending wave of unemployment is a direct result of a deliberate, self-inflicted choice. The baby has been tossed out with the bathwater. In February, exports decreased 23 percent from the same month last year.
People who made this choice were aware that they were living far from the day-to-day reality of everyday life. The newspaper said that structural weaknesses created over many years cannot be remedied quickly, that the state is placing its greatest weight on its most vulnerable citizens, and that it is time for politicians to remove import restrictions.
With increasing inflation, declining foreign exchange reserves, a widening current account deficit, and a sinking currency, Pakistan is experiencing severe economic difficulties.