The economic woes of Pakistan are aggravating with each passing day.Pakistan is selling its embassies in US and the government has ordering shutting down of malls and markets early to save energy. And, now, the country is facing shortage of cooking oil and ghee. Around 90% of the edible cooking oil in Pakistan is imported to feed its 22.52 crore population. However, since imports have been hit with banks not opening Letters of Credit, cooking oil and ghee is reportedly falling short in the markets, Dawn reported.
The soaring prices of chicken and wheat flour has already hit the budget of most households in the country, and now the producers are running short of ghee and cooking oil ahead of Ramzan, which falls in the month of March. If the situation is not controlled, these two items, which remain in high demand in Ramzan, might see a massive surge in their prices.
What's the situation? The lifting of 358,000 tonnes of edible oil from customs-bonded warehouses has been suspended because the banks have been turning down requests for opening LCs and retirement of documents.
The State Bank has been informed that the commercial banks have conveyed to the importers-cum-manufacturers that the edible oil has been excluded from its list of essential items with immediate effect.
As a result, the default in the retirement of LCs in the favour of foreign suppliers is attracting late payment surcharge while the rupee continues to lose its value against dollar, making imports costlier.
The palm oil rate has already jumped to Rs 14,000 per maund from Rs 13,000 per maund. This has led to the sudden increase in the prices of ghee and cooking oil by Rs 26.
At the same time, 358,000 tonnes of raw material are awaiting clearance. Also, 175,000 tonnes loaded in 10 vessels are waiting discharge at Karachi and Bin Qasim ports.
Letter to the SBP: Pakistan Vanaspati Manufacturers Association (PVMA) Chairman Sheikh Abdul Razzak in a letter to SBP Governor Jameel Ahmed has raised concern and said that the existing stocks can only meet the demand for three to four weeks.
He has urged the SBP chief to direct the commercial banks to honour industry's request for LCs. He said that despite the sufficient stocks discharged in Karachi's custom-bonded warehouses, the industry is unable to lift the assignments because of the banks refusal to retire the documents.
The PVMA chief has said that this is creating a negative situation in the market.
Karachi Chamber of Commerce and Industry chief (KCCI) chief, Mohammed Tariq Yousuf has regretted that LCs are not being opened by the commercial banks despite issuance of instructions from the State Bank.
Economy crumbles: As devaluation of Pakistani rupee is happening fast, imports will be difficult. The foreign exchange reserves of Pakistan is also declining and have plummetted to a historical low of $5.5 billion. This is a record low of Pakistan's depleting foreign reserves in the past eight years.
Government's efforts to imrove the economy are not paying any dividends.
Finance Minister Ishaq Dar is hopeful to revert the situation, but till now, nothing concrete has been done. Even several attempts to to restart talks with the IMF for the release of next tranche have remained unfruitful.