Hike in key policy rate hits parts vendors amid 3-fold serge in material cost: PAAPAM

KARACHI – Pakistan Association of Automotive Parts & Accessories Manufacturers (PAAPAM) Chairman Abdur Razzaq Gauhar has deeply regretted the State Bank’s move to increase discount rate by 150 basis points. He lamented that this move will multiply the current woes of the autoparts manufacturers, who are already facing severe liquidity crunch owing to three-fold hike in cost of raw materials and sea freight. Demanding the reversal of 1.5 percent increase in the interest rate, PAAPAM chairman observed that this rise will lead to a crisis of unforeseen proportions for the industrial sector in general and the auto parts sector in particular. The auto parts manufacturers are currently struggling to survive under the impacts of rising cost of raw materials & freight, deterioration of rupee exchange rate, higher minimum wages, and expensive energy. Several industrial units have already been forced to shut down their plants. The State Bank’s step may prove to be the last nail in the coffin, stated Razzaq Gauhar. He added that the governor of the central bank has negated the spirit of the PM’s initiative of promoting “Make in Pakistan” by raising the discount rate for the second consecutive time in Friday’s monetary policy statement. This increase in rate will reverse vital investments in the industrial sector and increase the defaulters’ list. He said that Pakistan automobile industry’s contribution to GDP is fairly substantial and it is providing employment/sustenance to over 4 million families. A very encouraging sign is that Pakistan parts have increased its share in the export market as well. Many new players have entered the 220 million population market, but limiting the cost of inputs is still a challenge for this autoparts industry. He stressed that import substitution and savings of foreign currency equivalent of billions of rupees have been achieved by our parts’ producers, through localisation of imported items. 



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