Connect with us

Business

Big industries output declines for eighth straight month

Published

on

  • Pace of contraction sharpens to 11.59% in February.
  • Both domestic and global factors have contributed to this decline. 
  • Decline is a significant concern for country’s economy.

ISLAMABAD: In an alarming development, the large-scale manufacturing (LSM) sector — which accounts for almost one-fifth of the country’s economic growth — contracted for the eighth consecutive month.

The pace of contraction sharpened to 11.59% in February compared to the same month of last year, data released by the Pakistan Bureau of Statistics (PBS) showed.

This decline is a significant concern for the country’s economy because of the LSM sector’s dismal performance, the gross domestic product (GDP) growth will also suffer a significant blow this fiscal year.

Industrial output witnessed a decline of 5.56% in the first eight months (July-February) of the ongoing fiscal year 2022-23 compared to the same period of the last financial year. Over the previous month (January), LSM output went down by 0.5%.

Both domestic and global factors have contributed to this decline, including high energy costs, rupee devaluation, and the government’s tightening of monetary and fiscal policies. These factors have limited imports due to a lack of dollars, contributing to the negative growth of the sector.

The global economic slowdown has added to the woes of industries in Pakistan, with many businesses scaling back operations or reducing operating hours, while others have shut down their plants. Ongoing economic and political instability in Pakistan has also been linked to the decrease in industrial output by independent political economists.

Uncertainty in the country has led to a decrease in investor confidence, resulting in a slowdown in manufacturing activities as well. 

Moreover, the government’s inability to provide a stable and conducive environment for businesses has further worsened the situation, with investors hesitant to make long-term investments in the country. Combined, these factors have contributed to the ongoing nosedive of the LSM sector, which could impact Pakistan’s overall economic growth.

The LSM sector has witnessed a decline in production from August 2022 to February 2023, the breakdown shows:

  • 0.02% decline in August, 
  • 2.7% decline in September, 
  • 7.63% decline in October, 
  • 6.15% drop in November, 
  • 3.51% decrease in December, 
  • 7.9% contraction in January 2023. 
  • 11.59% decline in February

All major and small sectors’ output contracted in February, including textile, food, coke and petroleum products, chemicals, automobile, pharmaceuticals, cement, fertilisers, iron and steel, furniture, leather products, electrical equipment, and non-metallic mineral products.

To combat soaring inflation, which clocked in at 35.4% in March, the State Bank of Pakistan (SBP) raised the discount rate to 21%. Since July 2021 when inflation was at 7%, the bank has raised the rate by threefold or 1,400 basis points, hindering industrial activities by making bank financing more expensive.

In FY22, Pakistan’s LSM sector grew by 11.7% over FY21, aided by rising global demand and favourable government policies to boost GDP growth, with big industries contributing a significant portion to the economy.

According to the PBS data, on a year-on-year basis, in February the following industries showed a significant decline:

  • Textiles — 19.67%, 
  • Pharmaceuticals — 25.47%, 
  • Food — 2.43%, 
  • Garments — 2.99%, 
  • Non-metallic minerals — 1.33%, 
  • Iron and steel — 9.19%, 
  • Chemicals — 14% (of which chemical products output was up 2.96% while fertiliser was down 25%) 
  • Football output — 17.3% 
  • Machinery and equipment output — 28.45%, 
  • Automobiles — 64%, 
  • Computer, electronics, and optical products — 39.7%; 
  • Furniture — 12.7%, 
  • Cement — 3.4%, 
  • Wood products —74.85%, 
  • Tobacco — 10.6%, 
  • Rubber products — 4.88%,
  • Coke and petroleum products — 6.35%, 
  • Leather products — 1.6%, 
  • Other transport equipment output — 31.2%,  
  • Cotton cloth — 17.7%,
  • Cotton yarn by 30.1%

Output during the July-February fiscal year 2022-23 as compared to the same period of FY22 has increased only in wearing apparel (garments) by 35.5%, leather by 3.85%, furniture by 58.45%, and football by 35.8%.

During these eight months of the ongoing fiscal year, the outputs of the following industries declined:

  • Food output — 1.95%, 
  • Beverages — 6.14%, 
  • Tobacco — 20.4%, 
  • Textiles — 14%, 
  • Wood products — 68.65%, 
  • Paper and board — 3.4%, 
  • Coke and petroleum products — 9.4%, 
  • Pharmaceuticals —22.4%, 
  • Rubber products — 7.3%, 
  • Non-metallic mineral products — 9.1%, 
  • Computer, electronics, and optical products — 25%, 
  • Machinery and equipment — 38.6%, 
  • Automobiles — 38.6%. 
  • Cement — 11.8%, 
  • Iron and steel — 3.9% 
  • Fabricated metal — 12.8%

Business

An increase in tax was made on restaurant card payments.

Published

on

By

After 15 years, the SRB reduced the service tax that 58 hotels and restaurants in Karachi could have charged on debit and credit card purchases to 15%. This action is a part of the Sindh budget, which was designed to make eating out less expensive for customers.

Prior to this, Sindh’s tax on credit and debit card purchases was lowered from 15% to 8%.

Officials from the SRB have further stated that the service was made available for input adjustment of restaurant tax payments. With this step, businesses will be able to efficiently handle their tax responsibilities and the tax process would be made simpler.

Only a few eateries have been given authority to remove the lower tax rate, even though this tax facility has been reversed.

Continue Reading

Business

The KSE-100 Index rises following a sharp decline in the previous session.

Published

on

By

The government is considering filing a treason case under Article 6 against PTI founder Imran Khan, former president Arif Alvi, and former deputy speaker Qasim Suri. On Tuesday, the KSE-100 Index was up more than 1.3% during early trading, following a day of roughly a 2 percent loss due to growing political unrest and the potential banning of the party.

However, the benchmark index of the Pakistan Stock Exchange was trading at 79,074.63 by 11:49 a.m., having gained 535.45 points, or 0.68 percent, after reaching an intraday high of 79,578.04.

Market analysts said that political tensions were the primary cause of the KSE-100’s earlier Monday decline of 1578.71 points, or 1.97 percent.

They did point out, though, that a correction was a reasonable reaction to the protracted upswing that allowed the benchmark mark index to reach 81,839.86 on July 18.

As a result of interest rate cuts and the possibility of another IMF program, the Pakistan Stock Exchange has gained 22.97 percent so far this year. The cycle began on June 10 with a 1.5 percent decrease in borrowing costs.

Continue Reading

Business

In interbank trade, the US dollar crushes the Pakistani rupee.

Published

on

By

During interbank trade on Tuesday, the US dollar’s value increased by 15 paisas, reaching Rs 278.45.

It is important to remember that Fitch Business Monitor International expressed concern about the possibility that Pakistan’s economic stability may be jeopardized by the ongoing political unrest.

The fragile situation of Pakistan’s economic recovery was emphasized by Fitch in its most recent Pakistan Country Risk Report, which also noted that economic activity has been impeded by urban protests.

(PTI),In spite of multiple successful judicial appeals, the founder of Pakistan Tehreek-e-Insaaf (PTI) is expected to stay behind bars, the article notes, underscoring the fragile political environment.

With no urgent plans for new elections, this scenario suggests that the coalition administration will remain in office for the next 18 months.

Fitch also described an eventuality in which the government could change and be replaced by a technocratic administration. This suggests that the government of Pakistan would carry out the reforms demanded by the IMF, contributing to the 3.2% GDP growth expected in 2024–2025.

The policy rate has stabilized above projections, while the research predicted it may reach 16 percent this fiscal year and 14 percent the following year.

Continue Reading

Trending