ISLAMABAD: Pakistan’s retail sector has suffered a staggering reduction of up to 60 percent in sales during the Eid Al-Adha shopping season as compared to the last year, traders said on Monday, attributing it to rampant inflation and higher taxes in the South Asian country.
The three-day Eid Al-Adha festival marks the culmination of the annual Hajj pilgrimage and is typically preceded by heightened commercial activity as believers buy sacrificial animals, clothes, gifts, deserts and sweetmeats.
The business community was expecting up to Rs500 billion ($1.8 billion) in business this Eid, which alongside the sacrificial animal trade would have brought the total seasonal economy to Rs1.4 trillion ($5.04 billion), according to Kashif Chaudhry, president of the Central Association of Traders in Pakistan.
But traders across major urban centers like Islamabad, Lahore and Karachi have reported unprecedented drops in footfall this year, saying the situation has left business owners struggling to cover basic operational overheads.
“This year, according to [last year’s] figures, our expectations were that there would be business of at least Rs400-500 billion [$1.4-1.8 billion] on Eid,” Chaudhry told Arab News.
“We see that this year at least 60 percent of ordinary business has been affected.”
Pakistan’s consumer price inflation surged to 10.9 percent in April compared to 7.3 percent in March as the ongoing conflict between the United States (US) and Iran drove fuel prices higher and created supply constraints.
The downturn is severely impacting traditional retail hubs that rely on seasonal spending to drive annual sales targets in clothing, footwear, electronics and festive food sectors.
Chaudhry said the retail estimates are compiled by tracking inventory data from manufacturers, importers, large factories, and small-scale producers against actual distribution to shops.
Arab News could not independently verify the figures from external sources, while State Minister for Finance Bilal Azahr Kayani and Khurram Schehzad, an adviser to the federal finance minister, did not respond to requests for comment regarding the traders’ claims.
Pakistan’s government has consistently defended its ongoing fiscal tightening and rigid tax enforcement measures as mandatory prerequisites under its multi-billion-dollar International Monetary Fund (IMF) bailout programs, which aim to stabilize the country’s struggling economy.
However, the business community argues that the rapid implementation of these tax reforms, paired with high interest rate, currently at 11.5 percent, has systematically crushed domestic demand.
The slow commercial activity extends from upscale brands down to middle-class wholesale hubs, leaving vendors unable to clear seasonal stock or meet their short-term credit liabilities, according to Chaudhry.
In Lahore, the second-largest city in the country, the usually bustling commercial centers have been “quiet.”
“Markets are deserted, there is silence everywhere, and sales have dropped to rock bottom,” said Zulfiqar Ahmad Bhatti, who leads the Gulberg Traders Board, pointing to absent crowds at Liberty Market, Al-Latif Center and other major hubs in the city.
“A person earning just Rs1,000-2,000 ($3.60 to $7.20) a day is forced to choose between buying petrol, paying children’s school fees, managing household groceries, or spending money on Eid shopping.”
In Karachi, the country’s sprawling financial capital, the commercial slump has severely hit major supply lines and wholesale distribution rings.
Atiq Mir, president of the Karachi Tajir Ittehad, said that commercial activity in the metropolis has declined by more than 50 percent.
“Shopkeepers are worried, while customers seem to have disappeared from the markets,” Mir told Arab News.
Mahmood Ahmad, a local trader in Karachi, said there was an acute absence of buyers in the prominent electronics and garments markets, which used to be bustling with customers ahead of Eid Al-Adha.
“This year the number of buyers appears to be very low in electronics market, which is largest in the country,” Ahmad said. “In the adjoining Cooperative Market, the garments business has also slowed down significantly.”
For shopkeepers, inflation is compounded by what they describe as “heavy” tax enforcement by the Federal Board of Revenue (FBR), which requires them to have digital Point of Sale (POS) machines for authorities to keep track of earnings.
Faaiz Jalil, a retail shopkeeper in Islamabad’s Blue Area commercial center, said business owners have slashed inventories, amid collapsing domestic demand.
“I used to buy large stocks, now I buy less than half of that, thinking that if this gets sold then I will buy more,” Jalil told Arab News. “There is extremely high inflation. I have never seen such inflation in Pakistan.”
