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Pakistan’s business confidence score drops to negative 4%

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  • OICCI conducts Business Confidence Index Survey – Wave 22 from Sept-Oct 2022.
  • Survey reveals highest drop in confidence was recorded in “services sector”.
  • Manufacturing sector records net confidence level of positive 3% despite drop of 20%.

KARACHI: Pakistan’s business confidence score (BCS) decreased to negative 4% in September-October 2022, against positive 17% in March-April 2022, Overseas Investors Chamber of Commerce and Industry (OICCI) announced on Wednesday.

The OICCI’s comprehensive Business Confidence Index (BCI) Survey – Wave 22 was conducted throughout the country from September to October 2022.

It revealed that the highest drop in confidence was recorded in the “services sector” (24%), followed by “retail and wholesale trade” (22%), and the manufacturing sector (20%). 

The survey sample consisted of 42% respondents from the manufacturing sector, 33% from the services sector, and 25% from the retail/wholesale trade.

Despite recording a significant drop in confidence of 20%, the manufacturing sector recorded a net confidence level of positive 3%, whereas the services and retail sectors stood at negative 8% and 14% respectively.

Commenting on the BCS, OICCI President Ghias Khan said, “The substantial decline in the overall Business Confidence to negative 4% is regrettable but not surprising considering the highly challenging political and economic situation during the past six months.”

Besides very high inflation and increased fuel prices, significant currency devaluation also dampened economic activity. 

“Record level of rains during August leading to severe flooding in Sindh and other parts of the country further restricted the business activities,” he added.

OICCI BCI Survey, conducted periodically face to face, across the country in nine cities, covering 80% of the GDP, with higher weightage given to key business centres of Karachi, Lahore, Rawalpindi-Islamabad, and Faisalabad.

The OICCI Survey feedback covers business environment at regional, national, sectorial, and own business entity levels in the past six months, as well as the anticipated business and investment environment in the next six months.

Overall, more than half (56% vs 19% in previous wave) survey respondents were negative about the business environment in the past six months, and going forward only net 2% (vs 18% in the previous survey) were positive for the next six months. 

Commenting on the business situation for the next six months, OICCI Vice President Amir Paracha said, “These are challenging times, and the authorities are doing all they can to navigate the enormous challenges in front including managing inflation, restricted availability of foreign exchange and resource constraints.”

Key stakeholders, especially foreign investors would continue to support the authorities in taking long-term policy measures to streamline the economic fundamentals including fair taxation for all, and facilitate business and investment in the country, he added. 

The sentiments of the OICCI members, the leading foreign investors, who were randomly included in the survey, stand at positive 6%, substantially lower than the positive 33% in the previous wave. Foreign investors have in the past also shown higher confidence than non-members.

Commenting on OICCI members’ survey feedback, Ghias Khan, observed that “foreign investors’ feedback could have been more positive but for serious concerns on few critical issues like the undue delay in revising the pharma pricing and the extreme delays in overseas remittances for goods, services, and dividends”.

Such actions were seriously counterproductive for attracting foreign direct investment in the country. “The three major threats to business growth identified in the survey are inflation (78%), high taxation (71%), and currency devaluation (70%) which could potentially slowdown business growth in Pakistan, he noted.

Looking ahead, only 18% (34% in Wave 21) expect expansion in business operations, 2% (21% in Wave 21) planning new capital investment, and 7% of respondents (positive 16% in Wave 21) expect increased employment in their respective businesses.

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The gold price in Pakistan today

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According to the All Sindh Sarafa Jewellers Association, the price of 10 grammes of 24 karat gold increased by Rs772 to Rs184,928 from Rs184,156, while the price of 10 grammes of 22 carat gold increased to Rs169,517 from Rs168,810.

These oscillations are strongly correlated with shifts in the US dollar’s value, demonstrating the complex interplay between gold prices and exchange rates.

This emphasises how local gold prices are impacted by events related to the global economy.

On the other hand, the cost of 24-karat silver was constant at Rs 2,570. Globally, too, the price of gold increased somewhat by $9 to $2,057 per ounce.

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Pakistan receives a $2 billion loan from China, according to the finance minister

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The $2 billion loan was one year ahead of schedule and became due in March. According to reports, Beijing had informed Islamabad of the decision.

The International Monetary Fund granted Pakistan’s cash-strapped economy a $3 billion standby arrangement last summer, but the country is still battling to recover from the financial crisis.

According to ratings firm Fitch, one of the top concerns confronting the next administration would be obtaining funding from bilateral and multilateral partners due to Pakistan’s precarious foreign situation, as was stated last week.

This event occurs one month after Anwaar-ul-Haq Kakar, the acting prime minister, asked for a $2 billion loan to be rolled over for a year in a letter to his Chinese counterpart.

In his letter, Kakar also expressed gratitude for China’s efforts to lessen Pakistan’s load

of foreign payments.

It is to be noted that Pakistan acquired safe deposits of $4 billion from China to address the balance of payments issue.

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“Ready to work with Pakistan’s new government,” the IMF said.

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In response to the former premier’s request, IMF Director of Communications Julie Kozak stated, “I’m not going to comment on ongoing political developments,” during a news conference.

She continued by saying that they “look forward to working on policies to ensure macroeconomic stability and prosperity for all of Pakistan’s citizens with the new government.”

In addition to stating that the plan is “supporting the authority’s efforts to stabilise the economy and to, of course, with a strong focus on protecting the most vulnerable,” Kozack said the lender increased the total disbursements under the Standby Arrangement (SBA) to $1.9 billion.

This has been accomplished by closely adhering to budgetary constraints and safeguarding the social safety net. In order to keep foreign exchange reserves growing and rein in inflation, a strict monetary policy stance has been maintained, the speaker stated.

The PTI founding chairman decided to write a letter to the international lender, asking it to demand an audit of the election held on February 8 before it proceeds with discussions with Islamabad for a new loan programme. This move prompted the IMF to release its statement.

In response to the former premier’s request, IMF Director of Communications Julie Kozak stated, “I’m not going to comment on ongoing political developments,” during a news conference.

She continued by saying that they “look forward to working on policies to ensure macroeconomic stability and prosperity for all of Pakistan’s citizens with the new government.”

In addition to stating that the plan is “supporting the authority’s efforts to stabilise the economy and to, of course, with a strong focus on protecting the most vulnerable,” Kozack said the lender increased the total disbursements under the Standby Arrangement (SBA) to $1.9 billion.

This has been accomplished by closely adhering to budgetary constraints and safeguarding the social safety net. In order to keep foreign exchange reserves growing and rein in inflation, a strict monetary policy stance has been maintained, the speaker stated.

The PTI founding chairman decided to write a letter to the international lender, asking it to demand an audit of the election held on February 8 before it proceeds with discussions with Islamabad for a new loan programme. This move prompted the IMF to release its statement.

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