The ship agents have reportedly forewarned the current cash-strapped Pakistan government that export cargoes will suddenly halt as foreign shipping lines discontinue their services for the nation.
This happened after financial institutions like the banks paused remitting freight charges owing to a lack of dollar availability, per a media report published on Saturday.
Besides bordering nations, almost all international logistics from Pakistan are catered by sea, and disruptions could result in severe problems for the nation’s international trade, Abdul Rauf, Pakistan Ship’s Agents Association (PSAA) chair, warned Ishaq Dar, the Finance Minister, via a letter.
If international trade is stopped, the association warned the economic situation would worsen, adding that the foreign shipping lines are thinking of winding up services in Pakistan owing to lowered cargo volumes.
The PSAA chair wrote to Jameel Ahmed, the Governor of the State Bank of Pakistan (SBP), Syed Naveed Namar, the Commerce Minister, and Faisal Sabzwari, the Maritime Affairs Minister.
Rauf urged the concerned departments and ministries to intervene and establish continuity in seaborne trade in Pakistan by permitting outward remittance of the extra freight amounts to respective foreign shipping companies.
Owing to the discontinuation of the outward remittance of excess freight amounts to the foreign shipping lines, it was distorting Pakistan’s seaborne trade, which is heavily reliant on foreign shipping lines, the letter mentioned.
However, the crisis is regarding export cargoes as outward trade from Pakistan is largely container-based, as there are no grain or liquid exports from the nation.
The state-owned Pakistan National Shipping Company (PNSC) tackles only imports of other petroleum fuel and crude oil via 12 vessels.
The annual freight bill of Pakistan is close to USD 5 billion, and foreign firms receive the charges in international currencies, primarily the greenback.
The ship agents pointed out that owing to the ongoing state of affairs, the shipping sector suffered due to some economic highs and lows. Further delays in remitting legitimate dues will constrain external trade in Pakistan.
However, talking to the newspaper, former PSAA chair Muhammad Rajpar said Pakistan wasn’t close to an economic meltdown. Hence, the government has time to find a way to navigate the ongoing crisis.
Rajpar mentioned that innovative ideas could help navigate difficult times. One of them is hedging dollars and setting instalments for the payments to the shipping majors, Rajpar said.
Pakistan’s foreign exchange reserves reportedly rapidly dwindled to more than USD 4 billion in recent weeks, giving way to fear that the nation may default, prompting the SBP to apply strict controls on foreign payments.
In the meantime, the Petroleum Division has reportedly warned the central bank about petroleum stocks drying up as banks are unwilling to open and confirm the Letters of Credit (LCs) for imports.
Like other sectors, Pakistan’s oil industry is encountering hurdles to opening LCs due to the shortage in US dollar restrictions and needs placed by the SBP, per The Express Tribune.
References: The Statesman, The Business Standard, The Week