“Imran Khan is not wrong, there is money in the market,” says a small trader in the Karachi market.

A container from Shanghai to Karachi that used to cost $1,500 before March 2021 now costs $8,500, he says outlining the challenges. It’s the working capital that matters for importers, he explains. The dollar impact and higher container charges have increased the cost. Two years back, if we had say Rs10 million at hand to invest it meant we had roughly $65,000 but now it is about $55,000.

But, the PTI loyalist insisted empathetically that despite these challenges, his business was doing good because the buying power in the market has increased. “The doom and gloom impact that we had been predicting is negated by big businesses doing well,” he says.

When questioned with scepticism, he insisted that the people sitting in the market know best, adding that the purchasing power of businesses had actually increased during the economic recovery phase. Another small trader, loyal to Imran Khan, agreed with his sentiments. The exporters are doing well and the smaller auxiliary firms are benefitting from their gravy train.

When it rains, the big trees grow but the smaller shrubs in the shade also benefit, he explained in a somewhat cryptic metaphor of the trickle-down effect.

Some small traders argue that despite the economic brouhaha, money in the market has increased with big business largess trickling down

The large scale manufacturing (LSM) numbers do not support the statements as the recent numbers published by the Pakistan Bureau of Statistics indicate that LSM production from July to November in the current fiscal year dropped down to 3.26 per cent from 6.85pc in the same period last year.

Textiles, Pakistan’s mainstay industry, have grown no doubt with exports headed towards a figure of $21 billion this year. Sales over the last two years have grown by about 60pc in terms of dollars, says Khurrum Mukhtar, patron in chief of Pakistan Textile Exporters Association.

But the increase in sales has come hand-in-hand with a liquidity crisis. “For example, we used to buy a bag of yarn for Rs30,000 and pay 17pc GST on it. Now that bag costs Rs50,000 with a resultantly higher GST payment which is now stuck in tax refunds.

The textile sector has the longest production chain and value addition at each processing stage. Contributing nearly a fourth of industrial value-added segments and employing 40pc of the industrial labour force, its growth in sales seems to have trickled down to small businesses as well, notwithstanding its liquidity crunch. However, not all small businesses are so sanguine.

The global stimulus effect

The cost of my raw materials has shot up owing to supply chain disruption, says a small manufacturer of paints and inks. During the pandemic, the demand for certain chemicals went sky-high suddenly. For example, isopropyl alcohol is used for a variety of products but it is an essential ingredient for hand sanitisers. As demand increased manifold suddenly, its supply got highly constrained. As a result, reliable sellers in the market are either selling diluted products or using less satisfactory alternates.

For example, at the start of 2020, glycol ethers were available for Rs280-300 per kg, right now its price is around Rs1,050 — this is an impact of more than 300pc which cannot be explained by the exchange rate depreciation or higher freight charges. These chemicals have a range of uses from liquid soaps to cosmetics.

The global lockdowns and stimulus measures by Western governments exacerbated supply chain anomalies, he added. People were sitting at home with money on their hands which could not be spent on tourism or entertainment so people shopped online for consumer goods. Most consumer goods have some form of plastics, from toys and games to appliances.

Then the storms in early 2021 last year shut down the polyethene and polypropylene plants in Texas, USA, causing a global plastic shortage. These plants provided raw materials for everything from homes and cars to smartphones and face masks, according to the Wall Street Journal. In Pakistan, a Rs5,000 polypropylene bag has gone up to Rs10,000-11,000. Thus, a plastic utensil that was priced at about Rs200 now costs over Rs300.

While there will always be players lamenting whichever crisis is at hand, some indicators paint a contrary picture. Auto loans hit a new high in December while financing to construction jumped 85pc last year. The textiles sector is expecting a bumper fiscal year. A contractionary monetary and fiscal policy may appear dismal but despite appearances, it does seem Pakistan is faring better than what naysayers claim.

Published in Dawn, The Business and Finance Weekly, January 31st, 2022