Islamabad: The growth in the manufacturing sector in Pakistan (LSM) is 1.8 % during the first seven months of the current fiscal year, indicating the ongoing challenges of the country’s industrial base. This contraction, which was reported by the Pakistani Statistics Office (PBS), reflects a negative trend in deepening in the main industries, which are doubled by a high interest environment and strict import controls.
The performance of the LSM sector during the period from July to January of the fiscal year 2024-25 shows a decrease compared to the same period last year. Negative growth continues despite the latter slowdown in inflation, which has decreased to nearly 1.5 %.
One of the main factors in this recession is the decision of the State Bank in Pakistan (SBP) to maintain the interest rate without change by 12 %, in line with the pressure from the International Monetary Fund (IMF) to maintain narrow monetary policy. This decision created an unfavorable environment for investing business and economic activity, which leads to a lot in the business community to express their concerns about not recovery. According to business leaders, the major shift in politics, including low interest rates to one figure and low electricity prices is necessary for any meaningful economic recovery.
Many sectors are particularly struggled under the weight of economic slowdown, including food, chemicals, non -mineral metal products, iron, steel, electrical equipment, machinery and furniture. The food sector, in particular, was imposed by a 18 % sales tax on packed milk, causing a 20 % decrease in sales during the first half of this fiscal year, which strongly affects both farmers and milk processing industry.
In the context of the broader economy, the government expected general economic growth by 3.1 % for this fiscal year, but the expectations of the International Monetary Fund are still more conservative, indicating that growth may be less than 3 %. The FBR (FBR) is also struggling with the effects of slowdown, as it is expected to lose 450 billion rupees in tax revenue during the first eight months of the fiscal year.
Despite these challenges, SBP is still optimistic with caution. The central bank refers to high frequency indicators such as car sales, petroleum products, cement and private sector credit, indicating that some economic activity is captured. However, these positive signals have not yet been achieved in the LSM sector, as many sub -sectors, such as sugar, iron and steel, have declined to the bottom of the total performance.
In January, sugar production decreased by 16 %, and iron and steel production decreased by more than 11.5 %. On the other hand, the auto sector has recorded positive growth, while increasing production in tobacco, textiles, clothing and transportation equipment that contribute to some of the industry gains.
The package of reducing the electricity tariff in the winter of the government, which aims to reduce the burden on both industrial and residential consumers, had little impact so far. Power generation decreased by 3 % in February, indicating that the LSM sector performance for this month will likely remain negative.
The strong dependence in Pakistan continues on raw materials imported for industrial production in a major challenge. While the government briefly settled the import restrictions earlier this fiscal year, it reflected the trend in February to reduce imports to $ 4.7 billion, primarily to manage the pressure of the external sector. This helped stabilize the external sector somewhat, although it is also limited to the availability of materials for production.
Looking at the future, SBP maintains a growth of 2.5 % to 3.5 %, despite the current contraction in the LSM sector. The Central Bank hopes that the momentum in the main sub -sectors gradually compensates for the negative impact of troubled industries, which provides a basis for recovery in the coming months.
