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Contraction in LSM output dims prospects of growth this fiscal year

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2 years ago

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  • PBS data shows LSM output drops by 25% in March.
  • Big industries output witnessed highest-ever decline since COVID-19.
  • Steep contraction will increase pace of inflation, put jobs at risk.

ISLAMABAD: A steep contraction in output of large-scale manufacturing (LSM) in March has faded the prospects of achieving a positive growth figure, The News reported Tuesday. 

The delay in the revival of the International Monetary Fund (IMF) programme has choked the economy consequently the LSM contracted massively; as a result, it can halt economic activities, boost already-high inflation and increase unemployment.

Although the Ministry of Finance has projected a provisional GDP (gross domestic product) growth rate of positive 0.8% in its revised estimates, the latest figures of LSM for March 2023 demonstrate that it remained negative by 25%, compared to the corresponding month of the last year.

The big industries’ output witnessed the highest-ever decline since COVID-19 pandemic. In the first nine months (July-March) of the outgoing fiscal year, the LSM witnessed a contraction of 8.1%.

“Keeping in view the performance of the industrial and agriculture sector, the provisional growth figure may turn into negative up to -1%. Earlier, the efforts were underway for turning the provisional figure into positive ranging from 0 to 0.5%,” sources confirmed to The News.

The National Accounts Committee (NAC) is scheduled to hold its meeting within the ongoing week to calculate the provisional growth figures for the outgoing financial year 2022-23.

Dr Khaqan Najeeb, former finance ministry adviser, said the industrial sector had been unable to secure letters of credit due to the country being in a dollar liquidity crunch. 

The lack of access to imports has hurt industrial production as evident in the fall of LSMI output by 8.11% in the first nine months (July-March) of 2022-23.

“The revival of the IMF programme would have ensured a flow of dollars from multilaterals, bilateral and commercial monies to ease the imports and unclog the economic activity,” he said.

“It is likely that growth would be muted in the outgoing fiscal year with a contraction in the manufacturing and agriculture sector. This would create further unemployment and rise inflation due to shortfall in supplies,” he concluded.

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Irfan Siddiqui meets with the PM and informs him about the Senate performance of the parliamentary party.

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The head of the Senate’s Foreign Affairs Standing Committee and the PML-N’s parliamentary leader paid Prime Minister Muhammad Shehbaz Sharif a visit in Islamabad.

Senator Irfan Siddiqui gave the Prime Minister an update on the Parliamentary Party’s Senate performance.

Additionally, Senator Irfan Siddiqui gave the Prime Minister an update on the Senate Standing Committee on Foreign Affairs’ performance.

He complimented the Prime Minister on his outstanding efforts to bring Pakistan’s economy back on track and meet its economic objectives.

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Business

SIFC Increases Direct Foreign Investment: Investment in the Energy Sector Rises by 120%

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The Special Investment Facilitation Council is intended to help Pakistan’s energy sector attract $585.6 million in direct foreign investment in 2024–2025. The amount invested at the same time previous year was $266.3 million.

This is a notable 120% rise, mostly due to investments in gas exploration, oil, and power. Such expansion indicates heightened investor confidence and emphasizes the development potential in important areas.

The State Bank reports that foreign investment in other vital industries has increased by 48% to $771 million.

This advancement is a blatant testament to SIFC’s efficient investment procedure and quick project execution.

The purpose of the Special Investment Facilitation Council is to establish Pakistan as an investment hub by aggressively promoting regional trade and investment in the energy sector and other critical industries.

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Business

Discos report losses of Rs239 billion.

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When compared to the same period last year, the data indicates that discos have decreased their losses in the first quarter of the current fiscal year.

The distribution businesses recorded losses of Rs239 billion in the first three months of the current fiscal year, a substantial decrease from the Rs308 billion losses sustained during the same period the previous year.

Additionally, the distribution businesses’ rate of recovery has improved. It has increased to 91% in the first quarter of this year from 84% in the same period last year, indicating success in revenue collection.

Regarding circular debt, the Power division observed a notable change. Last year, between July and October, the circular debt grew by Rs301 billion. Nonetheless, this year’s first four months saw a relatively modest increase in circular debt, totaling about Rs11 billion.

These enhancements show promising developments in the electricity sector’s financial health in Pakistan, where initiatives are being made to accelerate recovery rates and slow the expansion of circular debt.

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