Restrictions on opening letters of credit (L/Cs) for imports, a chronic foreign exchange crisis and severely disrupted supply chains have forced vehicle manufacturers in Pakistan to extend factory shutdowns as the country teeters on the edge of a full-blown recession.

The country's L/C shortage has also curtailed economic activity across several other sectors, from shipbreaking to mobile phone production.

Dire straits

Pakistan's government has imposed severe restrictions on imports, making L/Cs available for little else other than essential food items and medicines. Local reports suggest that commercial banks have even been unable to provide L/Cs for edible oils and healthcare products.

The situation is unlikely to improve until a lifeline bailout is agreed upon with the International Monetary Fund, which appears to be the only option that will enable the country to escape from its economic crisis.

Factory closures

Earlier this week, Honda Atlas Cars Pakistan became the latest manufacturer to announce a plant closure when it said it would extend its longest plant shutdown this fiscal year until 30 April.

The company has produced no new vehicles since 8 March, when it had expected production to recommence by the end of that month.

Other major vehicle manufacturers to halt production include Indus Motor Company and Pak Suzuki Motor Company.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.