Thousands of people are rendered jobless in Pakistan as small and medium businesses find it difficult to sustain amid alarming inflation, reduced demand, rising costs and shrinking purchasing power.
And it doesn’t stop there with many large enterprises opting for downsizing in a market where there are very few new job opportunities.
But most alarming part is the 16 times reduction in banks’ lending to private sector during the first five months of 2022-23 as compared to the same period last year.
Lending to private sector is considered the main driving force behind the economic activities but the figures for abovementioned period stood at just Rs27.5 billion against Rs470bn in the five months of the previous fiscal year.
And the results are obvious: there are no new investments, no new business setups and no new employment chances in Pakistan.
Meanwhile, a number of domestic investors and traders are trying to move out of the country after disposing of their assets.
“The fear of default was minimised by the State Bank with providing the possible inflows’ data and rollover expectations but the continuing political uncertainty is proving to be nerve-breaking for many fearful investors and businessmen,” said a senior banker.
He said the US dollar had touched the Rs255 mark in the Hundi and Hawala market which indicated a very high demand for greenback.
“Unless and until the government comes out with a long-term programme showing strong commitment to domestic growth and assurance for no external default, many local businesses will be closed and they may leave the country,” apprehended the banker.
But please forget about offices and big businesses. Even a cursory look around will tell us that there are very few customers in markets and even now and then one can notice shops and small businesses shutting down.
“I had a small jewelry business in Anarkali with over a half dozen employees,” said a rickshaw driver who has three daughters studying in college and university. “I have to feed them and meet their educational expenses.
But he was worried about the high number of rickshaws on the roads and fewer people opting for hiring their services. “The shrinking purchasing power means there are less customers as more and more people tend to use public transport.”
Unfortunately, Pakistan is very poor when it comes to data collection and processing. No one knows how the exact number of people are being laid off and how many hired. In fact, there is no concept of record when it comes to income brackets.
So a person is considered employed even if he is paid less than the minimum wages announced by the government.
The latest example of businesses shutting their operations are the over 1,500 workers rendered jobless after three companies listed at the Pakistan Stock Exchange recently suspended their production for different periods in a market with very few new employment opportunities amid a rising cost of living and shrinking purchasing power.
However, these are the direct affected people only with their families members not counted. If we add those whose livelihood is indirectly jeopardized – contractors, subcontractors and vendors along with their employees as well as the service providers like transporters, food stalls and roadside kiosks – then the figures would have to be doubled.
The three companies in question are: Frontier Ceramics Limited (FRCL), Bolan Castings Ltd (BCL) and Baluchistan Wheels Ltd (BWL).
On Monday, the Frontier Ceramics Limited (FRCL) in a notification issued to the Pakistan Stock Exchange, mentioned energy shortages and cost, government restrictions and economic instability as the reasons behind the move.
“The unforeseen devaluation of rupee coupled with the government’s restrictions, including letter of credit (LC) approval constraints and general economic instability are also the reasons behind the decision,” it read
However, the Frontier Ceramics noted that they would keep the bourse posted about the resumption of production when the decision was to be taken.
At the time of announcing the closure, the FRCL share was being traded at Rs25.96, down by Rs1.05 or 3.88 percent on day-on-day basis.
However, the Frontier Ceramics isn’t first entity to take this decision as two auto part vendors suspended their production last week after a massive drop in sales of automobiles since July.
In this connection, Bolan Castings Ltd – the makers of various auto parts of tractors and commercial vehicles – informed the Pakistan Stock Exchange about suspending the production activities from Dec 5 to Dec 23. It cited the drop in sales due to a drastic fall in orders from its assemblers as the reason.
Its revenue had plunged to Rs474 million during the first three months of the current financial year from Rs621 million when compared with the last fiscal year.
Similarly, the production activities of Baluchistan Wheels Ltd – the makers of steel wheel rims for cars, heavy vehicles and farm tractors – said the production activity would remain suspended from Dec 12 to 23 amid a reduced demand.
Earlier, the company’s revenue had dipped 26 percent to Rs403 million in the first quarter from Rs547 million in the same period last fiscal year.