Letters of credit (L/Cs) may become a scarce commodity unless Pakistan manages to substantially boost its economic growth rate over the next few years, according a paper prepared by the Federation of Pakistan Chambers of Commerce and Industry (FPCCI).

It says that Pakistan's economy is on the verge of collapse and that to survive it needs annual growth rates of seven per cent or more over the next few years as against the current three to four per cent rate of growth.

Insufficient growth

The FPCCI paper argues that the average growth rate of 5.1 per cent over the last decade is insufficient to help resolve poverty and unemployment and has had a minimal economic impact in real terms due the country's increasing population.

"If this rate prevails for the next few years, it may create problems with malnutrition...already 60 per cent of the total population is living below [the] poverty line," according to director general of FPCCI's research wing, Dr Ayub Mehar.

Payment default

Mehar argues that if the country just maintains its present growth rate, this may lead to a situation in which Pakistan may default on its international payment obligations.

In which case, "no money will be left for opening L/Cs for imports and the international community will not come to our rescue," Mehar warns.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.