Lahore Chamber of Commerce and Industry fears that dollar surge could reignite high inflation

Lahore, August 28, 2012 (PPI-OT): The Lahore Chamber of Commerce and Industry Tuesday feared that the dollar surge could reignite high inflation and halt growth by hitting all the important sectors of economy.

In a statement issued here, the LCCI President Irfan Qaiser Sheikh said that the recent surge in the prices of the greenback would not only jackup the input cost but it would also erode the profit margins.

The LCCI President said that the State Bank of Pakistan needs to ascertain the factors weakening the value of rupee and check the possibilities of undue speculations and malpractices in the operation of foreign exchange markets in Pakistan. This will help stabilize rupee and restore the confidence of the business community.

Irfan Qaiser Sheikh said that an unchecked increase in the dollar rates is multiplying the cost of doing business and badly affecting the industrial, manufacturing and agriculture sectors as Pakistan has to import fertilizers, food items, oil, machinery and industrial raw material.

The LCCI President said that the government should take immediate measures to arrest further devaluation of rupee to avoid more damaging consequences for the economy.

He said though the weaker rupee benefits the exporters by giving them more rupees per dollar, but this benefit is neutralized by the costly imported inputs of manufacturing sector including textiles thus eroding the financial advantage of a weaker rupee.

The LCCI President said that the economy was already under tremendous pressure owing to multiple internal and external challenges it has been facing for the last many years. He said that that Foreign Direct Investment (FDI) has collapsed while the domestic investment hit a 60 year low.

He said that an acute energy shortage and heavy government borrowing is mother of all economic ills. He the government observed a little restraint; the economic situation would have been quite encouraging.

Irfan Qaiser Sheikh said that today almost all sectors of economy are showing negative growth and a further fall in value of rupee will cause more contraction in economic activities leading to a drastic cut in the tax revenue for government.

He said that if the greenback continues its upward trend, it will certainly inflate import bill besides lowering the competitiveness of Pakistan’s business and industry. Therefore, government should get quickly into action to arrest this dangerous trend.

The LCCI President suggested to the government to immediately review its energy plan, introduce institutional reforms and curtail non-development expenditures for the sake of country’s economy and its people.

As, he said, no policy would work in the absence of electricity that is a major input for a large number of industries.

For more information, contact:
Shahid Khalil
Information Department
Lahore Chamber of Commerce and Industry (LCCI)
Lahore -54000, Pakistan
Tel: +9242 111 222 499
Fax: +92 42 636 8854

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