Reduction in oil prices could trigger the revival of business and economic activities in the country

  • February 25, 2009

Rising oil prices had badly affected the business and economic activities in the country by substantially raising the cost of doing business and making our exports uncompetitive in world markets apart from sending inflation to record high levels making common man life miserable. However, now crude oil prices in international market have come down to below $ 40/barrel and this is the high time that government should immediately pass on this benefit to people by reducing domestic oil prices, observed Shaban Khalid, Acting President, Islamabad Chamber of Commerce and Industry in a statement. He said instead of providing solace to the poor masses, Government is earning a huge revenue of about Rs.15 billion per month by not passing on the full benefits of reduced crude oil prices in the international market to people and added that the best option to trigger the revival of business and economic activities in these recessionary times is to immediately make a hefty cut in oil prices.

Shaban Khalid said the industry has almost been crippled due to many factors high interest rate, rising manufacturing cost, energy crisis where electricity and gas shortage have brought most units to almost shutdown position. He said many industries have no alternates to electricity and gas while high mark up is adding to their miseries even forcing investors to reconsider making any further investments in the country. Moreover, the existing investors are also finding it hard to pay interest at such high rates especially now that the volumes have shrunk to almost 50% and in some cases even worst due to which even achieving break-even has virtually become impossible. He said lot of investment was made in textile sector in expectation of rising exports but now high interest rates have made payback of loans and interest very difficult for such investors. He said instead of making such high profits, government should pass on these benefits to the masses so that its positive effects could trickle down to the lowest and the poorest ranks of society. He said this will greatly help in bringing down inflation in the country as well. He said due to volatility of oil prices, investors cannot make sound future planning and stressed for bringing some stability in prices so that future projections of businessmen and investors may not fall victim to unpredictability of prices.

ICCI Acting President said rising oil prices has hit every sector of our economy. He said textile is the main pillar of our exports and due to high production cost, textile exports are on the decline showing 3.79 percent decrease during the first seven months of the current financial year as compared to the corresponding period of the last financial year. He said textile exports during January 2009 decreased by 8.98 percent as compared to December 2008 and added that if government continued with present oil prices, country would experience more reduction in exports in coming period. He said in such times, business and industry fully deserve at least this relief from the government. Therefore, he urged upon the government to immediately pass on the benefit of more than 70 percent reduction in crude oil prices in international market to people that will produce multiple benefits for the economy as it will reduce cost of doing business, promote trade & industrial activities, improve people purchasing capacity and enhance country’s exports.