Rhetoric and reality

LAHORE: Business owners are asking for concessions that they know cannot be granted under current circumstances. Some of their demands may be true as it impacts their businesses adversely, but then ordinary people suffer more because of IMF-imposed conditions.

Some of the demands they make do not come under the government’s domain and are contradictory in nature. For instance, the monetary policy is formulated by the State Bank of Pakistan, which is a completely autonomous body. It determines interest rates based on inflation in the country besides ensuring that it keeps the rupee stable against the dollar.

Our policy rates are high compared with the inflation rate in the country. In the last two months, inflation has dipped by a good margin. However, with the IMF-dictated budget on the cards, inflation is expected to flare up again.

The central bank has to be cautious in reducing the mark-up to a level that businesses desire.Our foreign exchange reserves are still not in a comfortable zone. The bank has to ensure that imports do not go out of control; high interest rates plus the SBP’s tacit control on imports are keeping imports in control. If imports increase beyond a certain limit, it will weaken the rupee.

This is what Pakistan cannot afford right now. For ordinary people, the lowering of inflation is a good omen as that slows down an increase in prices.High power rates are a problem. The so-called cross subsidy to consumers is a bluff propagated by the businesses.

Normal consumers pay either higher or the same power tariff as endured by industries, only the life line consumers are subsidized, and the subsidy is divided between normal consumers and industries as a service to the poor. Still businesses enjoy exemptions worth trillions of rupees that compensate the subsidy they share in the power sector. The gas subsidy to the fertilizer sector is being withdrawn on IMF insistence. Still the gas prices will go up in line with global gas prices. Earlier we were supplying domestic gas at low rates at the expense of provinces that were paid absolutely low royalties.

Despite reservations of businesses, and the doomsday scenario presented by them, the industrial and trade sectors are posting hefty profits. The performance of a majority of listed companies in this regard is testimony to the fact that things are not as bad as painted by some vested groups to grab some concessions.

Textile exporters have no place to hide as six months back they predicted a sharp decline in textile exports, which in reality are constantly increasing despite the high rates of power and gas as well as continuation of the sales tax regime.

The exports of low value-added textiles have declined but that of apparel continue to increase. And that is what Pakistan needs.Exporters of value-added apparel up till now have been compliant and fulfilled the conditions of global buyers. But they are lagging behind in sustainability compliance. We have few Leeds-certified knitwear or readymade garment factories.

The reuse of recycled fibre in Pakistan is still low. Our presence in technical textiles is negligible. The industry will have to overcome these drawbacks to ensure sustained growth. For the basic textile sector to survive, improving the efficiency of machinery is the only way.