A recent report indicates that the Pakistani government could experience a stoppage of all export cargo as foreign shipping companies are contemplating ending their services as a result of the shortage of dollars. This is because banks have halted the transfer of freight charges to them, and ship agents have alerted the government, which is experiencing financial difficulties, about this possible problem.
The chairman of the Pakistan Ship’s Agents Association (PSAA) has warned the Finance Minister of Pakistan, Ishaq Dar, that a disruption in sea logistics could have serious consequences for the country’s international Trade. He emphasized that almost all international logistics from Pakistan are handled by sea and any disruption could create significant problems for the country’s international trade.
The Pakistan Ship’s Agents Association has alerted that if international trade is halted, it will result in a further decline of the economic situation in the country. The association also mentioned that foreign shipping companies are already contemplating ending their services in Pakistan because of a reduction in cargo volumes.
The chairman of PSAA also wrote letters to the State Bank of Pakistan Governor, the Commerce Minister, and the Maritime Affairs Minister to request their intervention in ensuring the continuity of Pakistan’s seaborne trade by allowing the immediate outward remittance of surplus freight amounts to the respective foreign shipping lines. This was reported by the Dawn newspaper.
The letter sent by the PSAA chairman stated that the discontinuation of outward remittance of surplus freight amounts to foreign shipping lines was causing a hindrance to Pakistan’s seaborne trade, which is heavily dependent on these lines.
It is worth mentioning that this crisis is specifically related to the export cargoes, as all of Pakistan’s outward trade is in the form of containers, as there are no liquid or grain exports from the country. The state-owned Pakistan National Shipping Company (PNSC) only handles imports of crude oil and other petroleum fuel through its 12 vessels.
According to the ship agents, Pakistan’s annual freight bill is around USD 5 billion, which is mainly paid to foreign companies in international currencies, such as the US dollar. They have stated that due to the current economic situation, the shipping sector has been suffering, and any further delays in the payment of legitimate dues will greatly impact Pakistan’s external trade.
However, the former chairman of the PSAA, Muhammad Rajpar, stated that Pakistan is not yet close to an economic meltdown, and thus the government still has time to find a solution to the current crisis.Rajpar said that in difficult times, there are always innovative ideas that can be used to get out of the situation, one of them is hedging of dollars and setting installment for the payments to the shipping companies.
Pakistan’s foreign exchange reserves have dropped rapidly to over USD 4 billion in recent weeks. This has created fear that the country may default and prompted the State Bank of Pakistan (SBP) to implement strict control over foreign payments. Additionally, the Petroleum Division has warned the central bank that stocks of petroleum products may run out as banks are refusing to open and confirm Letters of Credit (LCs) for imports.
The oil industry in Pakistan, like other sectors, is facing difficulties in opening Letters of Credit (LCs) due to the shortage of US dollars and the restrictions imposed by the State Bank of Pakistan, according to The Express Tribune.
