KARACHI: Another two publicly traded companies announced on Friday they’re shutting down operations temporarily while a third one said it’s extending its ongoing production suspension for another week.
The three firms have joined a steadily growing number of firms that’ve shut their production plants because the country has run out of dollars to pay for the import of industrial raw materials.
Beco Steel Ltd said it’s halting production until further notice owing to delays in the approval of letters of credit (LCs). Its inventory levels have seen “significant reductions” with a negative impact on the supply chain, it said.
Similarly, Sitara Peroxide Ltd informed shareholders it’s no longer possible for it to operate the production facility due to many reasons, including the non-clearance of LCs for necessary raw materials.
Pak Suzuki Motor Company Ltd said the ongoing shortage of inventory, which is partly imported from abroad, has led it to extend the shutdown of its automobile plant for another week.
Speaking to Dawn, Pak-Kuwait Investment Company Ltd Head of Research Samiullah Tariq said it’s going to be a while before banks start opening LCs for industrial raw materials.
“The liquidity crunch is at its peak. I expect the situation to start improving in two to three months,” he said while referring to the revival of the International Monetary Fund (IMF) programme as the main trigger for dollar inflows that Pakistan needs in the immediate term.
Even though Pakistan is still under an IMF programme, the Washington-based lender has withheld fresh disbursements on account of Islamabad’s failure to fulfil loan conditions like energy tariff adjustments.
Earlier this week, Diamond Industries Ltd also suspended manufacturing because of the non-availability of imported raw materials. Before that, Crescent Fibres Ltd cut back its production by up to 50 per cent owing to widespread demand destruction. Suraj Textile Mills Ltd, Nishat Chunian Ltd and Kohinoor Spinning Mills Ltd also announced production cuts partly because of a high operational cost and low demand.
The government’s desperate attempts to arrange dollars bore some fruit on Jan 12 as it received promises of financial help amounting to $4 billion from the United Arab Emirates and Saudi Arabia.
The United Arab Emirates has said it’ll roll over its $2bn debt payable over the next two months while promising additional support of $1bn.
Published in Dawn, January 14th, 2023