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Auto parts sector irked over policy rate hike

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LAHORE:

The recent increase in the interest rate, of 150 basis points, by the State Bank of Pakistan will multiply the woes of automobile parts manufacturers, said Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) Chairman Abdur Razzaq Gauhar.

In a statement on Monday, he stated that the manufacturers were already facing severe liquidity problems arising from three-fold increase in the cost of raw material and freight rates.

Demanding the reversal of a 1.5% increase in the interest rate, the official observed that the hike will trigger a crisis of unforeseen proportions for the industrial sector in general and the auto part sector in particular.

“Auto part manufacturers are struggling to survive amid rising cost of raw material and swelling freight rates, deterioration of rupee-dollar parity, increase in minimum wages and expensive energy prices,” he said. “The jump in policy rate might prove to be the last nail in the coffin as several industrial units have been forced to shut down.”

He added that central bank governor had negated Prime Minister Imran Khan’s vision to promote ‘Make in Pakistan’.

This hike will reverse vital investments in the industrial sector and widen the list of loan defaulters, Gauhar said.

He highlighted that Pakistan’s automobile industry contributed massively to the GDP and provided employment to over 4 million families.

He cherished that locally produced auto parts had captured a modest share in the export market as well.

“Many new players have entered this segment however soaring cost of inputs was a challenge for the auto part manufacturers,” he said. “Localisation of imported items by this segment has saved billions of rupees in foreign exchange for Pakistan.”

Published in The Express Tribune, November 23rd, 2021.

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