Amir Khan

The Pakistan Bureau of Statistics (PBS) has reported a jump in the growth of Large-Scale Manufacturing (LSM) for December 2023. However, a closer look reveals a more nuanced picture with worrying negative growth. Talking to WealthPK, Javed Iqbal Malik, senior economic advisor at the Ministry of Industries and Production, said despite the seemingly positive December figures, the overall LSM growth for the period – spanning July-December 2023 – painted a bleak picture with a negative 0.39% decline compared to the previous year. He said the latest PBS data revealed a notable 3.43% year-on-year growth and a remarkable 15.69% month-on-month rise in LSMI for December 2023. He elaborated on the worrying trend of negativity, reaching its peak at -10.3% in June 2023, which contrasted starkly with the positive period observed from November 2020 to June 2022. It's worth noting that -10.93% contraction in 2020 was primarily due to the effects of COVID-19 pandemic.

 Malik further said the government was still adding an optimistic view, citing "potential recovery" based on high-frequency indicators. Requests for these indicators' definitions and calculation methodologies remain unanswered. The underlying data reveals a mixed bag of growth and contraction in various sectors of LSM. Talking to WealthPK, Joint Secretary at the Ministry of Industries and Production Syed Sibt-e-Abbas Zaidi said fertilizers, garments, and petroleum products experienced growth, fuelled by fiscal incentives and external factors. However, key sectors such as automobiles, cotton cloth, and yarn witnessed significant declines. He attributed these contractions to rising input costs resulting from IMF program measures, heavy reliance on inflation-boosting taxes, and the absence of fiscal incentives previously enjoyed by the major export sectors.

"The negative growth in LSM is intricately connected to the rising poverty levels and export contraction, further complicating Pakistan's economic situation. Restoring incentives to boost the LSM sector risks program suspension from the IMF, while the current policies lead to heavy reliance on borrowing, limiting decision-making autonomy," he pointed out. Addressing high input costs, fostering exports, and potentially reviewing the current expenditures are highlighted as crucial steps toward sustainable economic recovery. Despite the government's emphasis on a positive spin, the data reveals significant challenges in the LSM sector that require urgent attention and strategic decision-making. The policymakers face the delicate task of balancing short-term economic stability with the imperative of long-term sustainability.

Credit: INP-WealthPk